Is Gold a Good Investment?

Gold, one of the world’s oldest currencies, has stayed relevant for a long time. Many people hold onto it now as an “inflation hedge”. Early in 3000 BC, Egyptians started to smelt gold and make it into jewelry – a practice that we continue to this date. Mankind has been so obsessed with gold that they have uprooted their lives to find it and have even started wars to claim it.

How to Invest

Today, many people use gold as an investment tool. You can invest in gold in many ways, but here are a few of the main varieties. You can buy a gold mining stock, which would give you money based on a gold mining company’s profits. You can also buy a gold mutual fund or ETF, which would give you exposure to the gold market and moves with the price of gold. There are also derivatives, which is a contract that allows for a gold delivery at some point in the future. These contracts can then be traded, potentially making money on the locked-in contract price. If these aren’t for you, you can also buy gold receipts. These receipts, which mainly private mints offer to buyers interested in gold, allow the buyer to either redeem the gold or hold onto the receipt. You can physically buy gold, as well, and have the gold on hand while the market fluctuates and potentially live like Scrooge McDuck.

5743685921_aee6a7083b_z

Market Volatility

It’s not all good news for gold. The commodities market can sometimes be a rough place, which has caused gold to experience some rather large fluctuations in price over time. When dealing with gold, you must factor in many different things that can affect its price. Things like the demand for jewelry can make the price go up or down depending on the direction of the market. Interest rates, central bank reserves, and even the U.S. dollar all come into play when you are talking about what is driving today’s gold prices.

Applications of gold

Gold has other applications, as well. It is still widely used in a large jewelry market. Many countries consume and produce a lot of gold jewelry. In 2015, India and China were named the two largest consumers of gold – 1.2 million tons of gold were used total. That is triple what the next 8 countries consumed, which included the U.S. at over 140 tons of gold jewelry. Gold is also used in the manufacturing of electronics, fabrication, and many other manufacturing applications. Gold will always have a use.

Bottom Line

Gold can be a good investment as long as you do your research. Many wealthy people use gold as an inflation hedge or as protection against declining currency, though this depends on the country and time. There are many different ways to invest in gold, all with their own respective pros and cons. Gold has a variety of applications primarily coming from the very large jewelry market, but still has other practical uses. If you are looking to get into buying gold, I would recommend checking out “Rich Dad’s Advisors: Guide to Investing In Gold and Silver” by Michael Maloney or trying a gold-buying course like Ocean of Gold . Make sure that you are educating yourself before jumping into any market.

Advertisements