Due to the crisis facing the western economic powers, the past years had been a terrible years for investment of most financial products except gold. There are many speculations on the investment of gold, some claimed that the bubble will burst; that the metal is not immune to inflation or the supply of gold is not limited, thus causing the gold prices to depreciate overtime, while other experts believe otherwise.
But according to recent statistic, it is proven that, with the gold price of $37.81, if you had invested $10,000 into the gold market in the early 2001, your investment would have escalated to more than $69,000 by September of 2011, this profit had out-performed any other investment in the financial market. However, as a matter of traditional practice, much of the fervent investors only allocate a small fraction of their long term portfolio to gold. This is because traditionally, gold is merely used as a “hedging tool” during bad and uncertain times. As claimed by many, “gold is a great hedge against ‘black swam’- unexpected and catastrophic financial events”. In short, they believed that ‘when times are good, investment in gold typically go bad’.
Main reason most investors are reluctant to invest major portion of their monetary means in gold is because such investment generates no income and pays no dividends. Its price depends greatly on the prevailing market demand and supply condition. Presently, many investors had turned their attention to gold due to the weak and uncertain conditions in other tradable financial markets.
Recent actions of some central banks in developing countries such asChinaandSouth Koreato use gold to hedge against other form of financial reserves also push the gold price upwards. . However, when the world economy is stabilized and growing, the investment shall return to stocks, shares and bonds thus causing the gold price to diminish. According to David Kudla, chief investment strategist at Mainstay Capital Management, “People buy gold to hedge against inflation, deflation, economic or political uncertainty. We have all of those concerns — and real concerns about the debasing of currencies worldwide right now”.
Tony Roth, the head of wealth management strategies at UBS forecasted that “gold will fetch $2,200 an ounce in 12 months and could be worth as much as $2,500 an ounce”. However, he is still not keen in this investment as he claims that gold does not generate earnings and posses a low commercial value. He adds on, “we don’t think that it’s going to hold up over the long term
If you wish to invest in gold, there are a few ways to do it. You can opt for coins, gold bars, and gold-mining equity stocks or even in tradable certificates of gold bullion. Most of the professional investors will choose to invest in tradable gold bullion certificates because the mining equity stocks will be affected by various factors such as stock market conditions and the company’s management; hence making the stock prices more unstable than the gold prices.
Picture courtesy of: blog.goldbuyersexpress
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