Investment gold is generally considered as a safe haven and an insurance against inflation during uncertain economic and political times in the world.
Why is this?
Read excerpts below from an interesting article by Banyan Hill, an US-based advisor website on global investment strategies.
The Superman of Elements – Against Inflation
There aren’t many substances that don’t break down in seawater. Most metals in seawater become something else. Silver, zinc, copper and iron all happily combine with oxygen and rust.
Gold, on the other hand, does not rust. It takes high temperatures and pressures to make gold form compounds with other elements. The reason is simple: It’s a happy element.
Most elements are unhappy with themselves — they need to add or drop electrons to feel good. That means they turn into something else by combining with other elements. Most metals want to join with oxygen to get those extra electrons. The result is metal oxides — rust.
Gold isn’t like that. It’s happy all by itself, which makes it the Superman of elements. It’s so durable that nearly all the gold ever mined is still around today. That’s roughly 187,200 metric tons, according to the World Gold Council.
Scraps of Paper and Cloth
The price of gold is much more about economic conditions around the world. To understand the price of gold, we have to understand money.
Money is actually just a fiction that we all agree upon. We say that this scrap of paper and cloth with writing on it has value, so it does. The price of gold, on the other hand, is set by people hedging their bets on that fiction.
Sometimes we feel less confident about the value of a currency. When that happens, we want to own fewer scraps of paper and more “stuff.” Gold is a good choice. It has a long history of being a store of value because of its appearance and utility.
Read more about the subject from the source article.
Author: Matt Badiali at Banyan Hill.
Picture: Banyan Hill