Investing in Gold

There are four main ways that people can invest in gold. First, investors can buy physical gold through gold coins or bullion. However, this form of investment has some problems. One needs a safe storage place and an insurance scheme for the gold. Second, investors can buy stocks in gold-producing companies or companies that supply equipment for gold mining. The problem with this type of investment is that one is exposed to operational risks and company management blunders. Thirdly, investors can join the exchange-traded gold funds. The problem with this investment is that high management costs and brokerage fees typically accompany the investment. Finally, an investor can buy gold certificates from a financial institution with some gold reserves. The problem with this investment is that when the financial institution becomes insolvent, one risks losing one’s investment.

 Besides that, many people wonder why people still invest in gold in this age. They do not see the purpose of gold in this age. They believe that the monetary qualities of the past, which were possessed by gold, are long gone. Currently, they view it as a barbaric relic that haunts the present for no reason. According to them, there is no necessary reason people should invest in gold. They are right that gold no longer possesses the monetary qualities of the past, but they are wrong in claiming there is no need to invest in gold.



In the past, gold was used as money because it was a widely accepted medium of exchange across cultures. It was followed by developing currencies backed by gold reserves in the government treasuries, popularly known as the gold standard. However, following the challenges of the 20th century (the Great Depression), many countries abandoned backing their currencies with gold. Gold was eliminated from the monetary system and lost its financial purpose.

 However, gold is currently an essential commodity in the modern economy. It is due to the reason that is discussed below. One realizes that many governments still hold their wealth as gold reserves. International financial institutions, such as the IMF, also have their wealth as gold reserves. Banks across the globe are also focused on increasing their reserves of gold. Why do they do so? Gold is one of the best preservers of wealth! This example explains the reason above. In 1970, one ounce of gold was valued at $37. In 2010, one ounce of gold was valued at $1,410.
 
 Therefore, individuals, institutions, and governments who preserved their wealth in the form of gold are today 40 times richer than when they were in 1970. Additionally, the person who had $37 kept as money cannot even afford today what went for $37 in 1970.
Therefore, it is advisable to invest in gold, especially if you want to remain prosperous. The prices of gold are always on the rise.