Gold buying is one of the most established and respected strategies for protecting wealth. To understand why this is the case, it’s important to understand the difference between value and price. People engaging in gold buying are oftentimes worried about how their investments are going to perform in a bad market and how any wealth they have stored in the form of currency may actually be diminished by fluctuations in the value of currency.
Gold gained tremendously in value during the Great Recession. For many investors, once the Great Recession ended, it seemed like gold would go back to its old prices, which were in the neighborhood of $400-$700 before the explosion in interest in gold.
Gold buying, however, remained popular and it has held onto a lot of its price value. Understanding how that price functions is important to understanding why gold is attractive.
Value and Price
Precious metals, including gold, tend to retain their values. Their prices, however, fluctuate over time. When the value of the dollar goes down, the price of gold tends to go up. This is because gold remains as valuable as it ever was but it simply takes more dollars to purchase the same amount of gold as it did before the dollar lost value.
Currency instability results from many different factors. Many of those factors exist outside of the nation where the currency instability actually becomes an issue. For instance, instability in Europe and Asia oftentimes affect the value of the US dollar significantly. When this happens, people tend to gravitate towards investments outside of the norm, and gold buying is one of the strategies that people use to take advantage of those investments.
Precious metals are commodities and are traded in the same way that any other commodity is traded. They can be purchased outright, they can be purchased in the form of ownership of a fund and they can be purchased by investing in businesses that are associated with the production of precious metals.
Gold buying in any of these forms affords investors relatively similar benefits. Gold, however, is oftentimes purchased in its physical form, particularly when people are purchasing gold because they have significant worries about the overall health of the economy.
What Makes It Desirable
Right now, gold is priced at a level that many market analysts believe represents a correction from its highest prices during the Great Recession. The ongoing demand for gold is somewhat up in the air. Asia could start buying gold in great quantities if it picks up in production again. Many central banks have tremendous amounts of gold stored up and, if they were to release that onto the market, it would obviously cause the price of gold to go down significantly. There are always unpredictable and uncontrollable factors associated with any investment and, in this regard, gold, silver, and other precious metals are no different.
Gold is still a very attractive investment for many investors in today’s market. Even though the worst of the Great Recession seems to be behind the world, there are still sources of instability in the markets that make gold attractive to investors. When investors are worried that the wealth they have on hand now is going to diminish significantly due to forces outside their control, they often gravitate towards gold, as they have for centuries.
According to most analysts, gold will likely stay priced around $1500 per ounce for the remainder of 2013. It is possible that gold could lose value but, with continued instability remaining a problem, it is also quite possible that gold could increase in value once again.