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Gold as an investment

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800px-ANCIENT GOLD BOWL

An ancient Gold Bowl found in an Egyptian Pyramid

Gold1oz

One ounce of gold bar

Gold as an investment may look unusual to many, but it is a good investment indeed. Since ancient time, Gold has been used as a form of money, that is, as a store of value and as a medium of exchange. The history of usage of gold in this role dates back to at least more than 2,500 years and probably even to earlier times. Until very recently, until 1971, most of the central banks of most of the countries used to follow a system called Gold Standard, which plainly speaking attempted to give value to paper currency in terms of value of gold. However, in 1971 an international conference of sort took place and a system called the Bretton Woods system was introduced. With this, the gold lost its position as a pivotal commodity to decide the value of currencies. This has not affected the utility of gold as an investment, and gold continues to remain a good investment option. Most of the countries and the central banks continue to hold large reserves of gold. For individuals also gold continues to remain an attractive medium of investments. It is a good store for value and is considered a very safe investment particularly during crises like war or international tension and turmoil.

Gold PriceEdit

Factors Influencing Gold Price

There are many factors which may affect the price of gold though in the long run the price of gold has tended to rise. Some of the major influences on the price of gold are:

  • Sentiment
  • Bank failure
  • Inflation
  • Interest Rate
  • War & other crises
  • Supply & Demand
Gold Price verses Other Investments

The following table sets out the gold price versus various investments and key statistics:

Year to
31st
December
Gold Price
US$/oz
Silver Price
US$/oz
S&P 500 [1]Dow Jones
Industrial
Average [2]
Money
Supply M3 [3]
US$ billions
Farm Wages [4]
US$/hr
US Govt Debt [5]
US$ billions
191020.670.549.0559.60  2.6
192020.670.546.8171.95  25.9
193020.670.3315.34164.58  16.2
194034.500.3510.58131.13  43.0
195040.250.8020.41235.42  257.4
196036.500.9158.11615.89315.2 290.2
197037.601.6492.15838.92677.1 389.2
1980641.2015.65135.76963.991,995.53.50930.2
1990423.804.17330.222,633.664,154.65.523,233.3
2000272.154.601,320.2810,786.857,117.78.105,674.2
2005513.008.831,248.2910,717.5010,191.49.518,170.4

Buying GoldEdit

The price of gold fluctuates on an on-going basis and you may find certain predictions, but it is rather impossible to predict the price of gold with any certainty. Sometimes, external factors like international crisis may make the price go upward. Seasonal swings are also observed - during the festive seasons the prices may register an above normal increase. The experience has shown that following certain rules while buying gold as an investment is better. Some of these general rules are:

  • It is advisable to buy gold in the cheapest form, and in the purest form
    • Gold Bars
    • Krugerrands
    • Gold Sovereigns
  • It is a prudent policy to buy gold from a bank or from a reputed dealer
  • The endevour should be buy the gold when the prices are ruling at a relatively low level

Another question which you may confront while buying gold is as regards the type of Gold Investment. Some of them are:

  • Gold Accounts
  • Gold Futures
  • Mining Shares (of Gold companies)
  • Gold Bars
  • Gold Coins
    • Gold Bars versus Gold Coins
    • Old and New Coins

Gold CoinsEdit

Over centuries many countries have issued cold coins, and many countries continue to still mint and issue gold coins.

Some of the coins mostly issued in the past are listed below:

  • Austria 100 Coronas
  • Austria 20 Coronas
  • Austria 10 Coronas
  • Austria 20 Francs
  • British Sovereigns
  • Belgium 20 Francs
  • Chile 100 Pesos
  • Chile 50 Pesos
  • Chile 20 Pesos
  • Chile 10 Pesos
  • Colombia 10 Pesos
  • Denmark 20 Kroner
  • Dominican Republic 30 Pesos
  • France 20 Francs
  • Germany 20 Marks
  • Hungary 10 Korona
  • Italy 20 Lire
  • Mexico 50 Pesos
  • Mexico 20 Pesos
  • Mexico 10 Pesos
  • Mexico 5 Pesos
  • Mexico 21/2 Pesos
  • Mexico 2 Pesos
  • Netherlands 10 Guilders
  • Persia 1 Pahlevi
  • Persia 1/2 Pahlevi
  • Peru 1 Libra
  • Peru 1/5 Libra
  • Peru 10 Soles
  • Peru 5 Soles
  • Russia & USSR 10 Roubles
  • Russia & USSR 5 Roubles
  • Spain 25 Pesetas
  • South Africa 2 Rands
  • South Africa 1 Rand
  • Switzerland 20 Francs
  • Turkey 10 Piastre
  • USA 20 Dollar Double Eagle
  • USA 10 Dollar Eagle
  • USA 5 Dollar Half Eagle
  • USA 2.5 Dollar Quarter Eagle

See alsoEdit

External resourcesEdit

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