Overview: Gold Investing

Traditionally, this most sought after of all precious metals, has been on the scene for as long as man can remember. It has meant power, security, prestige and wealth. Evidently, no shift in this paradigm seems likely in the immediate or foreseeable future as gold investing 2013 trends suggest. Generally considered precious for various reasons including being used as an excellent hedge or shelter during times of economic, political or social crisis, gold remains the undisputed precious metal to own.

Primarily touching on gold investing in general, our article below touches on: gold’s historical longevity as a legitimate source of currency; primary reasons for investing in this metal; current market trends and projected trends; large cap gold producers; preferences of investment vehicles; and alternative gold-backed forms of investments. 

Historical Longevity

Since before the beginning of the early Roman Republic, gold has enjoyed unequaled status as the preeminent standard of currency–and with good reason. During the end of the 19th century, European nations faithfully adhered to a gold standard right up to the period of World War I. Even after the end of World War II, nations unilaterally reverted back to the gold standard with the Bretton Woods system fixing the U.S. dollar to gold at $35.00 per troy ounce.

However, all came to an end with the stunning 1971 Richard Nixon manipulation of the U.S. dollar. Basically, suspending the dollar’s ties to gold, a transition to a fiat currency system began. In the year 2000, the Swiss franc became the last foreign currency to capitulate to fiat currency. Gold was demoted to a mere thing of the past as far as the central banks were concerned. However, regardless of political correctness, gold continues to trade worldwide, and it has not waned in its popularity.

Major Reasons For Investing In Gold

Everyone can agree as to the value of investing in this yellow metal; however, the predominant reasons for investing in gold can be basically broken down into several major points.

It Holds Its Own Value

Typically, gold maintains its intrinsic value and has consistently done so since first introduced as a form of currency more than three thousand years ago. Furthermore, for many people gold is a legacy worthy of passing on to the next generation. Essentially, gold is wealth personified in its highest and purest form.

Perception of the Dollar’s Weakness and the Safety of Gold

Whenever the overall value of the dollar comes up against other currencies as it did during 1998 and 2008, people traditionally and quickly gravitate to gold. Inadvertently, this in turn causes a rise in the price of gold. During those particular years, gold reached $1,000 an ounce and went on to almost double to a near $1,900 mark from 2008 through 2012.

Inflation/Deflation Flexibility

Whether it’s inflation or a deflationary period such as the Great Depression, gold traditionally out performs other investments.

One example is the years of 1946, 1974, 1975, 1979 and 1980 when U.S. inflation reached its highest levels. Incredibly, gold gave a real return of 130.4% on the Dow Jones Averages as compared to other investments of -12.33%. Whenever the cost of living goes up, gold prices also trend the same.

On the other hand, during times of economic depression, or deflation, prices typically drop dramatically while the purchasing power of gold spirals up exponentially.

Geopolitical Stability

Traditionally, no matter the state of the economy or the governmental policies, gold many times is known as the “crisis commodity.” Despite all outward circumstances, gold consistently outperforms many other investments during years of uncertainty. For example, during the 2013 European Union and monetary euro crises, gold prices still managed some stunning and inexplicable price performances. Typically, these crises led to a stampede, if you will, of investors and speculators towards gold and the gold futures markets.

Supply Constraints

Despite historic claims of supply constraints, most of the gold supply during the 1990s surged from bullion sales coming out of the global central banks. Moreover, gold mining continues at prolific rates and so do in-depth gold explorations at levels not previously known.

Increasing Demands

Emerging market economies also contributed to a boost in the demand for gold. In nations such as India, wedding season during the fall provides an exploding market for gold supplies, especially where jewelry is concerned.


Gold and its many off-springs such as gold-backed IRAs, gold ETFs and other vehicles continue to out perform other investments. This leads us to the question of just what are the best methods to invest in gold.

1-Bullions, Ingots, Coins and Jewelry:

Pros: This is the actual, real, physical stuff. Cons: Bullions are bulky, heavy and not easily hidden if that is the owner’s intent. Hidden costs such as storage, shipping, insurance and other fees are substantial.

Ingots, or smaller denominational one-gram pieces, are rapidly gaining in popularity with small-scale investors. Pros: Smaller and more easily hidden than large bullion, gold ingots are available for as little as $25.00 per month on several gold investing platforms. More popularly traded gold coins and jewelry will likewise continue to hold as traditional investment forms.

2-Mining Stocks:

Pros: Well below trading prices worldwide; investing in the extraction of gold in mining operations is still a good investment. Cons: Buying company shares instead of futures, ETFs, gold-backed IRAs or the actual metal itself runs the risk of managerial and administrative mistakes with more severe repercussions.

3-Gold ETFs and Gold-Backed IRAs

Pros: They provide a less expensive and conspicuous way to cash in on gold rather than physically holding the metal. Additionally, they are better suited for novice investors and have various tax advantages as opposed to regular Roth IRAs. (1)

Future Outlook

Presently, the outlook for gold continues to spiral upward, slowly but steadily. It is bullish all the way with analyst sentiment holding at an average of 78%. However, the price is cautiously fluctuating between gains and losses on a daily basis; moreover, the debasing of currencies is generally trending bullish for gold, on a long-term basis.

Despite the price of yellow metals nearing two-year lows through much of 2013, gold continues to shine regardless of market or international conditions. The top ten large cap foreign gold producers continue to control the market while maintaining a perceived diminished gold supply. However, to the experienced or incredulous investor there continues to be “gold in them hills,” and there always will be.

Late Breaking News From Bloomberg-July, 2013 (2)
“Gold gained the most in more than a year on speculation that the Federal Reserve will maintain U.S. economic stimulus, boosting the appeal of the precious metal as a store of value. Silver also surged. Bullion rose 1.3 percent last week, capping the first back-to-back weekly gains since May.”

Reference Sources:

(1) http://www.investopedia.com/articles/basics/08/reasons-to-own-gold.asp

Overview: Gold Investing
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