Why So Many Investors Are Buying Gold

You may have noticed that the investment world cannot seem to stop talking about buying gold. The value and the attractiveness of this precious metal is probably nothing new for you. However, it is not just by chance that everyone has fixated on gold right at the moment.

The story behind the price of gold is thousands of years old. During that time, numerous factors have come into play and made gold an ever more important investment choice for people who want to be wise with their money.

All these factors have converged in the last few years to make gold the supreme investment choice in the world. This fact is testified to by the choices of nations and billionaires. If you have thought about buying gold, you should understand the reasons behind its triumphant advance.

What Is Gold?

Gold is a pure metal. It is an element on the periodic table of elements. It is not a mixture of elements or an alloy, such as bronze. It is usually discovered in deposits in the ground known as veins.

When gold is removed from the ground, it usually is found joined with other elements. This form of gold is known as ore. Refiners take this gold ore from miners and reduce it to pure gold which can be shaped into jewelry, coins, bars and other figures.

Why Is the Price of Gold So High?

Right from the beginning of civilization, people have treasured gold for its luster and its malleability. Unlike iron and other hard metals, gold is relatively soft and can be beaten into a variety of shapes without the need to heat it up.

It eventually became the most valued currency in every part of the world. You can see evidence of this in any ancient text, such as the Bible or in Greek myths.

Nations began to use bank notes or other paper currencies a few hundred years ago but this paper was always backed by gold. Whoever issued the paper tied its value to gold reserves held by that entity. There was almost always some way to take that paper to an institution and exchange it for gold.

In the 19th century, the Industrial revolution was well underway when people began to switch from gas and steam power to electric power. This was a critical addition to the value of gold because it possessed certain properties which made it vital in electric and electronic hardware.

Gold does not rust and it conducts electricity fairly well. It is also extremely ductile and can form many different shapes without losing integrity.

This importance continues today because gold is found, in small quantities, in most mobile devices and computers. One expert estimates that, at today’s prices, there is about 50 cents worth of gold in every cell phone.

Even with all that support for its price, gold was still only valued at around $300 at the turn of the 21st century. This was long after the beginning of the computer age and the digital revolution. What moved the price of gold as high as it is now was something political rather than something fundamental to gold.

A lot of people thought that the rising price of gold in the last decade was just a bubble like the gold bubble of 1980. Back then, inflation fears drove the price of this precious metal as high as $600. Later, when fears were calmed, the price dropped back down to less than $300. Some people ridiculed those who were buying gold and thought that they were just going to lose it all when the bubble burst.

But the bubble did not burst and it still has not burst. Instead, gold has a value that has quintupled since the turn of the century. It now stands at about $1,600 on most days. What has driven it so high and why has it not settled back down to a significantly lower value like it did last time?

The answer is wrapped up in governmental policy decisions. These decisions were mostly made in the US but many other countries have been playing similar games with their currencies. Faced with incredible budget deficits and slow growth, the government ran out of ideas about how to spur growth. Under the guise of a policy known as quantitative easing, the Federal Reserve began to print money.

Money-printing always brings inflation. That is why people are buying gold in such high numbers. The value of gold has not gone back down because the dollars used to determine its value are not worth as much as they used to be.

A well-known politician recently had the courage to tell people that gas prices will never go back down to what they were at the turn of the century because the US dollar is not worth as much as it used to be.

As he pointed out, if you paid for gas in gold, you would actually pay less now than you would have before.

Testimonials

This is more than just an opinion. Look around the world at the way that nations and billionaires are acting with regard to gold. Former third-world nations like India and China are experiencing significant increases in their industrial bases. Their governments are preparing for the future and buying gold in immense quantities.

Billionaires such as Frank Giustra and John Paulson have been known to buy gold recently. Even George Soros, who used to ridicule people who buy gold, is buying gold now in large and unexpected amounts. When asked, these men have made the point that everyone else has always known: investors want something real in their portfolios to protect their wealth. It does no good to have an investment in something that grows at 3% or 4% per annum if the inflation rate is 5% or more.

How to Invest in Gold

If this has convinced you to buy gold, you can do so in a few different ways. You can buy bars of gold but they weigh a kilogram and would cost you more than $50,000 each at this point. Gold coins are a very popular form of gold purchase because they are small and can be liquidated in varying amounts when you want to cash in your earnings. You can also invest in gold stocks issued by gold mining and gold refining companies.

When so many intelligent people and even governments are buying gold, it makes sense to follow their lead. Even if you can only buy gold in small amounts, it makes sense to do it now. The price could be out of reach soon if things continue this way.

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