Is Gold a Good Investment?

Investors usually buy gold as a form of investment, quite like buying any precious metal or foreign currency. Some prefer possessing gold in its physical form, while other make investments in companies connecting gold industry, but the intention is the same-to book profits when the prices go up. There are quite a few characteristics that make investment in gold worthwhile but one can’t overlook the fact that like any other investment, the worth of this investment too may decrease or increase. But is gold a good investment?

History

Historically, gold has been used not only as an investment but also as a currency. This naturally occurring metal is rare and in demand mainly for making jewelry and to some extent as an industrial metal, making it a valuable metal. Though at present US citizens are free to own private gold, in late thirties of the previous century, private ownership of gold was banned. The US government formulated “Gold Standard”, allowing use of its currency for buying and selling of gold as a means of stabilizing the worth of its dollar.

Benefits

First, let’s see why is gold a good investment? There are many factors favoring that. First of all, commodities are tradable goods under contract. On unit of any commodity isn’t any different from that of another and the two can replace each other. That facilitates trading of commodities like gold and other precious metals. Another favorable factor is that gold isn’t currency, which can be produced by any country.  It implies that fiscal policies or political circumstances do not impact it worth so much. For example, a country may opt to print excessive currency, leading to inflation but it can’t produce gold that has to be mined and only a definite volume of it is available in nature. A lot of investors buy gold to circumvent effects of inflation.

Limitations

Investments in gold are not free of potential drawbacks. On investing in gold in its physical form, you need to look for a secured place for its storage. You can’t altogether rule out the possibility of its getting lost or stolen. Moreover, like any other investment, investment in gold is also associated with the risk of losing its worth over time due changes in its demand. And finally, the price at which gold gets sold by dealers is most often higher than its real value.

Misapprehensions

Contrary to popular belief that investment in gold should be in the form of physical possession of gold, there are other options open for investing in this precious metal. It will be worth considering buying stocks of companies connected with mining of the metal or manufacturing of gold jewelry. So, you can make monetary gains whenever there is an upward swing in the prices of gold, without really being in possession of physical gold.

Conclusion

The worth of any investment may decrease or increase and gold is no exception. The logical conclusion will be not to invest a substantial part of your funds in any one kind of investment. If you must make investments in gold, make diversified investments by investing parts of available funds in stocks, mutual funds and bonds.

You may find it interesting to find what Warren Buffet answered on being questioned, “Is Gold a Good Investment!”

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