Why invest in Gold?

Why invest in Gold?

Why invest in Gold?

The price of gold has been rising at accelerating pace since 2001. The demand is likely to remain high as long as doubts remain about the chances of successful end to the debt crisis in Europe. Gold has regained its historic role as an ultimate safe haven and benchmark currency because of the fears of the global currency system unravelling.

The worries of the Europe's sovereign debt crisis spreading and the U.S economy slowing down have resulted in the price of gold to striking a record high. Also the fear of a double dip recession, which seems more and more likely, has made the markets nervous and pushed the price of gold up even further.

Saying all this, one might think that the price of Gold would be too high to gain any considerable profit from an investment.

The spot price of gold has risen 12.7 % alone in this year from $1104 up to $1244, outperforming most of the other indicators. By contrast the S&P 500 has fallen 6.5% so far, the FTSE 100 by 10.6% and copper - the bellwether industrial metal - is down by around 12.5%.

Since 2009 the central banks have been stocking up their gold reserves, which haven't happened in 20 years. The central bank of Saudi-Arabia has doubled its holding recently, and many other nations, such as Russia, the Philippines, Kazakhstan and Venezuela, have been extremely active in the gold markets. Despite the recent activity in the markets, only a minor part of the bank holdings are in Gold or Gold mining shares. In prior periods of economic stress, the Gold investments have ranged from 20% to 30% of Global Invest able assets, whereas today, the Gold investments are only 1-2%. Gold is treated as the ultimate safe haven by central banks, even safer than fiat currencies since governments can introduce their economy as more attractive to investors.

Since there is a definite limit on supply of Gold, central banks purchase it to limit exposure to inflation and instability to currency markets.

So does it still make sense to invest in gold? J.P Morgan released a report on 29th of June which says: "We continue to hold gold as part of our "hard asset" portfolio allocation, even at today's prices. Last December and January, our gold strategies were designed to leave room for upside until $1,230-$1,300/oz; we are in the process of revising our long-term price targets higher."

Rick Rule, the founder of Global Resource Investments, estimates that the nominal value of gold could double in coming three years. "I'm afraid I'm a good old-fashioned gold bug.You've heard all of the arguments through Aristotle forward about why gold is simultaneously a store of value and a medium of exchange. Despite the fact that those arguments are old, they're still very valid," he told.

Taking into account the state of the markets and what the analysts comments, we can assume that in the future gold will keep generating safer and steadier ground for investments than fiat currencies or stocks.

POST COMMENT

Colloidal Silver: Its Importance and Benefits Diamond Jewelry Enhances Look and Boosts Up Confidence Sterling Silver Jewelry – For Fanatics Tooth Colored Fillings Vs Silver Amalgam Fillings How to Choose Jewelry for Special Occasions Genesa Crystal Jewelry Recommended for Healing 14k gold earrings gem jewelry gem jewelry2 gold stud earring Sterling Silver Ring Looking For The Latest Trends Golden Retriever Puppies Adoption Info The Myth Of Jade Jewelry