Gold In Today's World

Few people today would question the value of gold

. And yet, this precious metal has few uses it can be proud of. It is used in dentistry and electronics due to its corrosion resistance property and to the fact that it conducts electricity. But even in these areas it can easily be replaced by copper or ceramics. In short, gold is pretty useless.

It comes natural then to ask ourselves where does its value come from? The definition of the precious metal provided by Wikipedia, gives us a partial answer: "A precious metal is a rare, naturally occurring metallic chemical element of high economic value, which is not radioactive." So gold is rare. Add that it is also impossible to obtain by chemical reactions in the lab, it looks enticing and does not oxide and you have the perfect combination. Gold was initially used in jewelry making. Later, it backed currencies and received the honor of being a solid store of wealth.

Today's economic times of distress prove its value without a doubt. Fearful of the state of the European finances, businessmen began to invest heavily in gold, in coins and gold bullion bars alike. The price of gold was pushed at historic heights of $1,252.11 an ounce on June, the 8th, 2010. And the trend is expected to continue as the end of the recession is nowhere in sight. We could conclude that gold is faring rather well in times of economic uncertainty.

Investors' interest in gold is based on solid economic grounds. Due to the system risk that some financial institutions were posing after the sub-prime market collapsed, governments had to spend massive amounts of money to bail out the banking system. In other words they printed out paper money which in the long term will lead to inflation. And gold is known as both a herald of inflationary pressures and as an inflation hedge.

Rumor has it that China was at some point in 2009 keen to buy the IMF gold reserves. No Chinese official came out to confirm the information as it was expected, but the information shows the amount of interest gold enjoys. Pension funds have also become keener in investing in gold, after experiencing the volatility of the financial markets and their traditional investment instruments: equity and bonds.

by: Jack Wogan.

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