Investment In Gold: What's In Store For The Price of Gold And The Dollar?
Investment In Gold: What's In Store For The Price of Gold And The Dollar? by Jet Lee
The media, and even the network news shows, have started reporting the price of gold regularly. For almost 20 years, between 1980 and 2000, the price of gold was hardly mentioned. There was almost no interest, and the price was either declining or stagnant.
Since 2001 however, interest in gold has spiked and so has its price. With the price well over $1000 an ounce, a lot more people are becoming interested in investing in gold and an economic indicator. A lot can be learned by understanding what the rising dollar price of gold foretells.
The rise in gold prices from under $300 per ounce in 2001 to over $1000 today has drawn investors and speculators into the precious metals market. Though many already have made handsome profits, buying gold per se should not be touted as a good investment. After all, gold earns no interest and its quality never changes. It’s static, and does not increase as ideal investments should.
It’s more accurate to say that one might invest in a gold or silver mining company, where management, labor costs, and the nature of new discoveries all play a critical role in determining the quality of the investment and the profits made.
Buying gold and holding it is somewhat similar to converting one’s savings into one hundred dollar bills and hiding them under the mattress, althoughtyet not exactly the same. Both gold and dollars are considered money, and holding money does not count as an investment. There’s a major descrepancy between the two however, since by holding paper money one loses purchasing power. The purchasing power of commodity money, i.e. gold, however, increases if the government devalues the circulating fiat currency.
Hoarding gold is hedge or insurance against government’s proclivity to debase its currency. The buying power of gold goes up not because it’s a so-called good investment; it goes up in value only because the paper currency decreases in value. In our present situation, that means the U.S. dollar is lossing value against gold.
One of the characteristics of commodity money (one that came about organically in the marketplace) is that it serves as a store of value. Gold and silver meet that test, while, but paper money does not. Because of this severe difference, the incentive and wisdom of holding emergency funds in the form of gold becomes smarter when the official currency is being devalued. It’s better than trying to save wealth in the form of a fiat currency, even when earning some small amount of interest, especially when this interest often attracts the highest taxation rate. The lack of earned interest on gold is not an issue once people figure out the purchasing power of their currency is declining faster than the interest rates they might get. The purchasing power of gold can rise even faster than increases in the cost of living.
It's probably a great idea to make sure you diversify a part of your savings into gold bullion or maybe gold-backed securities like the Gold ETF. Investment Advisors advise that people hold 10-15% of their money in gold, although with the current economic situation, I'd definitely aim for the high end of that range.
The writer hosts a site dedicated to Investing & Passive Income and is an avid gold and silver coin collector.
Article Source: http://articles.directorygold.com
For more articles on Investing visit the DirectoryGold Article Directory
For links to sites on Investing visit the DirectoryGold Web Directory
The media, and even the network news shows, have started reporting the price of gold regularly. For almost 20 years, between 1980 and 2000, the price of gold was hardly mentioned. There was almost no interest, and the price was either declining or stagnant.
Since 2001 however, interest in gold has spiked and so has its price. With the price well over $1000 an ounce, a lot more people are becoming interested in investing in gold and an economic indicator. A lot can be learned by understanding what the rising dollar price of gold foretells.
The rise in gold prices from under $300 per ounce in 2001 to over $1000 today has drawn investors and speculators into the precious metals market. Though many already have made handsome profits, buying gold per se should not be touted as a good investment. After all, gold earns no interest and its quality never changes. It’s static, and does not increase as ideal investments should.
It’s more accurate to say that one might invest in a gold or silver mining company, where management, labor costs, and the nature of new discoveries all play a critical role in determining the quality of the investment and the profits made.
Buying gold and holding it is somewhat similar to converting one’s savings into one hundred dollar bills and hiding them under the mattress, althoughtyet not exactly the same. Both gold and dollars are considered money, and holding money does not count as an investment. There’s a major descrepancy between the two however, since by holding paper money one loses purchasing power. The purchasing power of commodity money, i.e. gold, however, increases if the government devalues the circulating fiat currency.
Hoarding gold is hedge or insurance against government’s proclivity to debase its currency. The buying power of gold goes up not because it’s a so-called good investment; it goes up in value only because the paper currency decreases in value. In our present situation, that means the U.S. dollar is lossing value against gold.
One of the characteristics of commodity money (one that came about organically in the marketplace) is that it serves as a store of value. Gold and silver meet that test, while, but paper money does not. Because of this severe difference, the incentive and wisdom of holding emergency funds in the form of gold becomes smarter when the official currency is being devalued. It’s better than trying to save wealth in the form of a fiat currency, even when earning some small amount of interest, especially when this interest often attracts the highest taxation rate. The lack of earned interest on gold is not an issue once people figure out the purchasing power of their currency is declining faster than the interest rates they might get. The purchasing power of gold can rise even faster than increases in the cost of living.
It's probably a great idea to make sure you diversify a part of your savings into gold bullion or maybe gold-backed securities like the Gold ETF. Investment Advisors advise that people hold 10-15% of their money in gold, although with the current economic situation, I'd definitely aim for the high end of that range.
The writer hosts a site dedicated to Investing & Passive Income and is an avid gold and silver coin collector.
Article Source: http://articles.directorygold.com
For more articles on Investing visit the DirectoryGold Article Directory
For links to sites on Investing visit the DirectoryGold Web Directory
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