All that glitters is gold

May 29 2017 by Vogue Financial

What is that makes gold such a desirable asset? Why does this one metal hold its value and continue to draw investors? And should it be part of your investment strategy?

Gold is unique in many ways. It has physical properties that are not mimicked by other precious metals which may make it the ultimate financial asset, take these points into consideration.

There is no time limit on gold

It doesn’t corrode it has the ultimate shelf life, most of the world’s gold that has been mined is still in existence.

There is no counter party risk

Gold’s value doesn’t rely on another party, there is no government backing it, there is no shareholding backing its value. It can’t suffer a massive lawsuit, and it is not susceptible to bank failure.

Gold is perhaps the ultimate money

Gold was the measure that all other forms of money were judged by until the repeal of the gold standard, but it still holds intrinsic value. It is a very liquid asset, you can easily convert it to cash, it is easy to carry, it is divisible, durable, and has a consistent value and is accepted globally.

Gold is gold

You can’t create it, you can’t replicate it, you can’t fake it (some have tried), it can’t be inflated by governments, and you can’t grow it.

Preservation of wealth

There is a lot of appeal in gold, but perhaps the most enduring quality is its ability to preserve wealth. An ounce of gold now is around $1,254 USD. Cash that in and you could buy yourself a decent suit. Similarly in 1920, an ounce of gold was worth around $20.67 in the US, that would also buy you a decent suit.

The difference here is that if you kept the cash from 1920 you would not even get a decent hanky now, but if you kept the gold you will still get that shiny new suit. Gold has preserved wealth for thousands of years.

Industry Use

Most people think of gold as something to be worn. Great for jewellery and flashy watches but it is a fact that gold has a utility value and is absolutely essential for some of the world’s most lucrative industries.

Gold’s conductivity makes it necessary to manufacture most electronics. Your mobile phone, computer, and TV all contain small amounts of gold. Gold’s application in electronics is just part of why there is such a strong demand for this precious metal.

Should you be in gold?

This is always a difficult question to answer. Gold has been quite volatile over the last 5 years, in 2013 it reached a peak of $1,798.80 USD and fell to under $1,100 USD in November 2015, right now it is as at $1,264 USD.

So why did it rise to $1,798 USD? And what caused it to drop so dramatically? One word – inflation. Commenting on gold’s slide after 2103 Donald Selkin of National Securities Corp said:

“Anybody who did some buying before this big drop is probably in some pain. The perception is that gold is not really needed as a safe haven. People are looking at the stock market, and they’re stunned, and there’s no inflation. So people are saying, ‘What do we need gold for?’”

In times of stress and inflation gold will rise, it will preserve wealth, but should you own it? Ask your financial adviser.

If you need to look at you investments or need some advice we are always here to help.

 

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