Gold is starting to generate a little buzz as it climbs to $1000 per ounce again. This could be the second time in as many years that it has crossed that ever important psychological threshold. Can it hold that level this time around or will it sink again? Will $1000 become support instead of resistance? You may be thinking that now is not the time to be investing in gold. However, if you had been investing in gold on a consistent basis over the past several years, you would be sitting on quite a bit of profit. I know that you are probably hesitant to start investing in gold if you have yet to do so; but let me give you 6 good reasons that you should be investing in gold now.
- Gold is a Store of Value
Gold has always been a store of value. In the late 1800's, a 20-dollar gold coin which had a weight of
- Gold Cannot be Created
The reason gold is a store of value is that it cannot be created out of thin air or printed into existence. The United States Federal Reserve has no control over gold. No central bank for that matter has any say in the amount of gold in existence. This is unlike all of the paper currencies that circulate around the world today. Dollars, yen, euros, and pounds can all be created by being printed or even through simple entries in an electronic ledger. That is why it is taking so much more of these currencies to buy the same amount of goods. It is the simple law of supply and demand. Increase the money supply, and it takes more to buy the same amount of stuff.
Gold, on the other hand, takes quite a bit of effort to locate, get the appropriate permits, build the infrastructure for a mine, dig the ore out of the ground, and process the ore into the pure gold that humans so crave. As a result of all the effort involved, the gold supply only increases by a few percentage points each year and has actually been decreasing since the year 2000. This helps retain gold's value relative to other products.
- Gold Cannot Go Bankrupt
Gold cannot go bankrupt like stocks and bonds of companies. It will always have some sort of value to someone around the world. The value of gold will never go to zero. No legislature or law can wipe out its value by a simple edict. No court can discharge its value as in a bankruptcy. Gold is not any individual's, any company or corporation's or any country's or government's liability. It is an asset in the purest and simplest form.
- Gold is Tradable
For thousands of years gold has had value as money and has been tradable for other resources like land or livestock. Gold could be traded for food or gasoline or clothing. It is easy for two individuals to ascertain the value that gold has based upon what you can trade it for. Furthermore, gold will continue to have value for many thousands more years. You may not understand why a piece of shiny rock would so attract the human race. I don't understand it either, but it is a fact and one that you cannot argue against. Someday gold may have little value but certainly not in my lifetime.
- Gold Does Not Correlate to Other Investments
One only has to look over the past several years to see that gold has done well as an investment while stocks and real estate have done poorly. That is not to say that gold always does well in any investment climate. Look at what happened for the twenty years from 1980 to 2000. When gold was doing poorly, stocks were on a tear enjoying the greatest bull market in history. It's OK if I buy gold now and it does poorly, since that means my other investments are doing great. I am certainly not saying that you should invest everything you own in gold, but you don't want to have nothing invested in it either.
- Gold is Portable
Finally, gold is extremely portable if you need it to be. I can carry $10,000 worth of gold in my pant's pockets; I can carry $100,000 worth of gold in my laptop case; and I can place $1 million worth of gold in the trunk of my car. I am not saying that you want to have to do this. What I am saying is that it is nice to have that as an option. Throughout the history of the world, dictators and tyrants have come and gone and governments have risen and fallen. Those individuals and groups in power have sometimes made life difficult for those who might not agree with them. It is those political dissidents who had the financial means available to them who were able to move to safer regions of the world. Wouldn't it be nice to have a nest egg to be able to move to a safer location as well as the means necessary to start over?
As you can see, there are many reasons to invest in gold both for financial as well as potentially geopolitical reasons. Gold is valued throughout the world by all of mankind for these various reasons. The value of gold can transcend local currencies and politics and can be used to acquire the goods needed for everyday living. If you are currently invested in gold, consider adding to your holdings over time. If you haven't yet invested in gold, there is never a better time to start than now.