Investing in gold

 

Throughout many years it has been proven that gold is a solid investment. In financial crisis such as a recession this commodiry behaves more like actual money (currency) than a commodity.


Investors use gold as hedge against recession, depression, and money devaluation. Precious metals such as gold, silver can protect against inflation and should be part of every portfolio.
Most governments in the world hold reserves in gold so as an investor it would make sense to have a reserve in gold as part of a portfolio.

 

The price of this precious metal is driven by supply and demand. In 2005 the WCC (World Gold Council) announced that yearly supply of gold in the world is about 3,900 tones and the demand is about 100 tones less than of the supply. Production of gold will most likely stay the same in the future, but can not imply anything as far as the price since the price is driven by current markets.

 

Investing in gold mining companies is one strategy that can be taken to yield profit from gold. Mining companies do not move the same way as gold prices do. These companies profit when gold prices go north, they profit if they buy more mines, if mines have great output. So one can see how one company might out perform the price of gold. But with the positives there are negatives and risk to companies and buying into stocks.

 

Mines might run dry, natural disasters might occur with the mines and poor management are just a few factors that might drive a company into the ground. Investing into gold mining companies stock is a great way to make money when there is a stable political climate and little turmoil since those are ideal conditions for stock market growth. Best comparison is the mighty Google stock and price of gold. When looked at over
a ten year period gold has concurred even the mighty Google stock.

 

Buying a commodity vs. buying in physical form is another benefit. Gold is a commodity but a bit different than oil, or other commodities. Crude oil can be bought as a commodity but it will not make sense to buy in physical form, while gold can be purchased in both and can conveniently be stored at a bank or a safe in a house and have 24/7 access to it. While it will not make sense to buy and store 100 barrels of crude oil in a garage.