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Physical gold is real money. No other currencies withstand the purchasing power of gold over thousands of years. Investing in gold is not spending or using up one’s financial assets, but preserving it. Most of the major currencies now such as pound, yen, us & Canadian dollar slowly lose their purchasing power. Thus, listed below are few reasons why everyone is encouraged to devote themselves in yellow bars and the like.
Gold maintained its worth
Gold maintained its worth in the market for hundreds of years. Its price may be unstable for quite some time; however it sustained its value for a long period of time. No any paper currencies withstand its purchasing power. Gold price and USD currency in particular are correlated with each other negatively. However, sometimes the other one move ahead from the other, thus, the other one can be a leading indicator to the rise and fall of the value of the other one. In the long run, gold remains stable while others fall.
No one’s Accountable
The production of physical bullion is not within the control of bankers or politicians. They have to be dug from the ground and be formed in a very complex and pricey approach. Nature itself hinders the massive production of gold and cannot be manipulated compared to the production of paper money.
Gold price can be volatile in a short period of time, but its value and profit in a long term basis is remarkable. In case that the price of gold is down, it will soon go up in a short period of time. That is the reason why the gold price has raised in the past years and investing in gold rarely make some losses.
Supply and Demand
Regardless of changes in the price of gold, its supply increases moderately every year. Since it cannot be created easily due to environment restrictions, costly production, and nationalization threat, it cannot be produced as easily as paper currencies. Increase of supply in the printed paper money with less demand means less value. Thus, future economic downfall is inevitable, and gold is the first-rate substitute to any paper currency.
As a major hedge for future economic breakdown, central banks became the largest buyers of gold. Likely, Chinese government encourages its people to invest in gold bullion, putting 5% of their savings to the said commodity.
However, the large funds that can substantially move the financial market are just beginning to engage in gold. And if they can just put 5% of their assets in management into gold, the value of gold will surely increase sharply.