Gold is usually associated with wealth, richness, or treasure. It has remained a valuable commodity throughout the times, finally ending up in Federal Reserves around the world and indirectly part of the commodities exchange market. To the modern day man, gold is primarily seen as an alternative investment vehicle to stocks, funds, futures, bonds, real estate, etc…, rather than a display of one’s wealth…unless you’re Trinidad James. Here is why people invest in gold:
Gold is perceived as a “protector of wealth” in times of a slow or poor economy and is INVERSELY RELATED TO THE DOLLAR. This occurs because gold has intrinsic value. Unlike gold, a dollar is simply a piece of paper with value that is in flux because of the health of local and global economies. So when the economy takes a downturn, which it has hundreds of times in the history of the world economy, people lose faith in the value of currencies, equities, bonds, and real estate and must turn to something less fragile and more tangible. After the first couple waves of decreasing confidence of investors in economies and markets are seen, more and more of them will follow suit and rid themselves of any assets that could decline in value–a sort of snowball effect. Meanwhile, the price of an ounce of gold is steadily rising as consumer confidence in bonds, equities, and real estate falls. That investor money which is fleeing from these assets are being transferred and safeguarded by the golden fort.
At a certain point in time, people began questioning whether gold was as valuable as it was perceived to be, but that shakiness has withered with market reassurance in the long-term value of gold. I am currently sitting on a Gold Exchange Traded Fund that is a stock which is pegged to the health of gold and tracks its global demand. In my portfolio, gold is primarily a long-term investment in comparison to the mutual funds, stocks, and other assets. In the recent boom of the market, I purchased this Gold ETF in hopes of hedging (protecting) any future losses that might result from a future slowing down of the economy. If and when the economy slows or even tanks, my gold investment will rise by a similar magnitude. Remember the inverse relationship of the dollar and gold and know that the dollar is valued by the relative strength of America’s economy. With this being said, you should purchase gold ETF’s or actual gold at the highest highs of the stock market and when global trade traffic (imports, exports) is high. The better the dollar is performing, the lower the price of gold will be, which is an opportune time for you to get your hands on some gold.
Lastly, while we are on the topic, please understand that we are experiencing a rapidly-improving global economy that has progressing away from the financial crises of 2008-2012. The health of the US and Eurozone economies are moving forward, although at different paces since the Eurozone has had to deal with multiple bailouts and near-defaults on currencies. So, if you have not been keeping up to date, the time to buy gold is now or soon if you don’t believe the economy will continue rising to greater heights in the next decade or so. I suggest you take a small bite at gold when you feel the economy is at a peak, and wait until it slows down and see your gold investment shine.