Throughout history, gold has been seen as a special and valuable commodity. Today, owning gold can act as a hedge against inflation and deflation alike, as well as a good portfolio diversifier. As a global store of value, gold can also provide financial cover during geopolitical and macroeconomic uncertainty.(Investopedia)
Gold has been a valuable commodity for centuries. Throughout recorded (and unrecorded) history, gold has been used as a currency and a symbol of wealth and power. Gold has been found in gravesites, buried alongside remains dating back as far as 4,500 B.C.E. This long-standing value demonstrates the stability of gold and its attractiveness over time.
Gold is considered by investors to be one of the safest investments, recovering its value quickly through economic downturns. Its price often tracks in opposition to stock market or economic swings. When investor confidence is shattered, gold prices often climb as nervous investors look for a safe place to put cash pulled out of the market. Gold is also a haven in times of inflation because it retains its value much better than currency-backed assets, which may climb in price, but drop in value.
If buying gold as an investment sounds like a good idea, read on to learn more.
Investing in Gold
Investing in gold is not like buying stocks or bonds. You can take physical possession of gold by buying either gold coins or gold bullion. Bullion is gold in bar form, with a stamp on it. The stamp contains the purity level and the amount of gold contained in the bar.
The value of the bullion or coin comes from its precious metals content and not its rarity and condition, and it can change throughout the day. You can buy bullion or coins from some banks, dealers, brokerage firms, and the U.S. Mint, which has been producing gold coins and bullion for investment since 1986.2
You can also buy stock in gold mining companies, gold futures contracts, gold-focused exchange-traded funds (ETFs), and other regular financial instruments. If investors purchase a gold-backed ETF, they are purchasing shares of a trust’s ownership in gold, but have no claim to the physical gold itself.3
Investing in gold with the idea it never loses value is the wrong approach. Like any investment or financial asset, gold is subject to supply and demand pressures that cause the price to fluctuate.
Current and Historical Prices of Gold
Investors should start by looking at the spot price of gold, which is what it can be bought and sold for at that moment. The spot price of gold is quoted per one gold ounce, gram, or kilo. For example, by the end of day on Monday, June 7, 2021, the spot price of gold was $1,903.00 per ounce, $61.18 per gram, and $61,181.45 per kilo.4
If you look at historical gold prices, you’ll find that the price of gold shot up dramatically in the 2000s. In 2008, the price of gold varied from around $720 an ounce to over $1,000 an ounce.5 As the economy sank further into the recession, gold prices soared to around $1,895 in 2011 due to investor sentiment and demand.5 By April 2020, gold prices declined slightly from where they were almost a decade earlier but continued to perform well in the midst of an economic downturn.
What Form of Gold Is the Right Investment for You?
Gold comes in many forms, so one may be better suited for your investment strategy than another. You could purchase physical gold coins or bullion, but they must be stored in a secure environment. This may involve paying a broker, bank, or another firm a fee.
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