Tuesday, 10 May 2011

Why should you invest in gold?

Gold is there even from the ancient period where there was no any other known metal. Gold is the first metal introduced to mankind. The color and value of gold attracted not only the ordinary people but kings and emperors also. Soon gold became an unavoidable luxury for all mankind. The Scriptures and Mythologies prove the importance of gold among generation to generation. Gold was associated with gods, immortality, and wealth and with every happy event of human beings like marriage etc. Earlier gold was used for making ornaments and after wards it was used to make plates, utensils, coins and even the crowns of kings. Idols are also made with gold. In all nations people and government are holding gold for various reasons

Historical value of gold. Gold has its own value in history and as stated above gold is the first metal introduced to mankind. Iron and Copper had given the greatest contribution to technological development and Economical Growth of all over the world. But gold has a shining historical value and also has a physical value. People pass their wealth from one generation to next generation in the form of gold. Earlier, rich people were buried their gold in the form of coins in pots to save it from robbers and thief’s. In The Bible we can read about gold from the first book itself (The Book of Genesis) which narrates the history of mankind from the beginning itself. All historical books, mythologies and studies reveal the importance of gold to generation and it has its own historical value. So people wish to keep gold which has a physical value as well as historical value.

Gold as a reserve for currencies. A certain percentage of gold is kept as security (reserve) for all paper currencies issued by almost all countries. Gold has its own value and the value shows only increasing tendency in history. So gold is taking the main part as reserve for currencies of many countries.

Gold as a hedge against inflation. When we check the value chart of gold we can see that the value of gold never seriously goes down in history. All times it tends to increase as per the increasing standard of living of people. We can see that the value of shares, stocks, real estate and other financial products come down, but the value of gold never came down. It goes up steadily. So if you include gold also in your investment portfolio you can keep as a cushion against inflation.


Saving you from Deflation. The prices and business activities may slow down when the deflation come into force. You may remember the recent recession which was affected almost all nations. But in the Great Depression of 1930s which was affected globally the price of all commodities came down sharply, but the price of gold affected only a slight fall.

Political insecurity. During political insecurity also the price of gold may not be affected adversely. When political insecurity happens people may migrate to other places or nations and such a time the value of financial products and real estate will come down sharply, but the value of gold never shows such an adverse result. The easiness of handling gold may help it to sustain its value even during the uncertainties.

Low Supply of Gold. You may be aware that when the supply of a commodity decreases the price of such commodity will increase. Here the supply of gold is decreasing year after year and the demand of gold is increasing. So normally the value of such commodity increases. If  it  is any agricultural commodities, the problem of supply may be seasonal, but in case of gold it is a natural resources and should be extracted from mines and the availability of gold from such mines are always decreasing and the chances of discovering new gold mines also very less. In such a condition we could not expect a sudden decrease in the value of gold.

Increasing consumption of gold. Many counties gold is related with their culture and most of the occasion’s gold is an unavoidable commodity. India is also one of the largest gold consuming countries. In India the main use of gold is for ornaments and jewelry, the wedding seasons increases the value of gold in India. Gold bars and gold bullions are used for investment purpose. In India Akshaya Tritiya- The third day (Tritiya) of Vaishaka month (in a traditional calendar in India) which occurs late April or early May of every year is considered as a good time for  investing and that day the purchase of gold for investment purpose also increases. For investment purpose gold mutual funds and Gold ETF are also there which provides security from handling liquid gold.

High Liquidity of Gold. Gold can turn to cash very easy. Due to heavy demand you can sell gold at any time in any gold ornament shops and can realize the full value, if the gold you hold is pure without dissolving any other metals like copper etc. (When making ornaments a small percentage of copper or silver is added with gold for the perfection of work)

The above mentioned reasons are tempting us to hold Gold which never decreases the value of our investment and can get cash immediately out of them. When you hold gold for investment purpose, try to hold pure gold in the form of coins (Gold bullions) or gold bars which may not compromise with purity. Buy sealed Hall marked gold from reliable shops or banks or go for Gold Exchange Traded Fund which never compromises with quality.

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