Is Gold Still A Good Investment

In times of economic instability, many investors ask the question

, is now a good time to invest in gold? While gold has proven to be an attractive asset throughout the centuries, its exact role in an investment portfolio may vary considerably. You must know the ins and outs of how to invest in gold to avoid the common pitfalls and maximize the returns.

Why is gold a good investment?

Traditionally, gold has been regarded as an indispensible part of an investor's portfolio. The answer to is gold still a good investment varies according to the purpose of your investment. If you are a speculator or an investor aiming at playing the market, you have to be careful about investing in gold. On the other hand, if you are primarily interested in saving, gold can be the most viable option.

Throughout the ages, gold has been regarded as the universal store of value. It is highly stable. The value of gold does not depend on issuers promise to pay. It is largely protected from the unpredictable fluctuations in the market. Possessing actual gold bullion is regarded as one of the safest and best investments. It is not a paper asset whose value can become zero with some economic and geopolitical change. No government can suddenly confiscate actual gold. Hence, gold is the traditional refuge during any 'flight to quality'.

Gold is regarded by investors as the best hedge against inflation and the falling value of currencies. As prices of goods and services rise, the value of paper money falls. In this situation, gold is the only thing whose value was found to be stable. In simple terms, while you require more paper money to buy the same number of goods as before, you need the same or even less quantities of gold to buy that amount of goods than before.

Research has shown that people who brought Euros to safeguard against the falling value of dollars got a return of 47% on their investment while those who bought gold got 131% return on their investment.

There is one unique characteristic of the gold market which sets it apart from the other commodities of investment. The supply of gold is very inelastic while the demand shows wide fluctuation. The major gold producing nations of the world has seen the gold production to stagnate or fall. At the same time, the economic boom in the developing countries has driven up the demand for gold. The investments in gold have thus resulted in positive returns.

However, one needs to be careful of frauds while investing in gold. You can be sold shares in non-existent gold mines or counterfeit coins. You should also be wary of little known companies that buy gold for cash as some of them have been found to be money laundering mechanisms.

by: Marcus

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