To fully understand the purpose of gold, it’s certain that one must look back to the start of the gold market. The gold’s history began many years ago when the Egyptians started making jewelry, around the year 560 bc. Gold started to be use as a means of currency. At that time, merchants created a standard and organized way of transferable form of money to make trade easier for them. The creation of a gold coin stamped seemed to be the only way out, as gold was already widely accepted and used throughout various places of the world in general.
Following the adoption of gold as money, its importance continued to grow throughout Europe and other continent. With started from the Greek and Roman empires prominently displayed in museums around the world, and Great Britain developing its own metals-based currency as well. British pound and silver, as well as pence were all based on the amount of gold that is in possession too.
The importance of gold in the modern economy centers on the fact that it has successfully saves wealth throughout thousands of generations. However, will not work on paper-denominated currencies unlikely, idea that gold preserves wealth is even more important in an economic environment of these days. Where investors are faced with a declining in dollar and rising inflation too, Historically, gold has served as an avenue against both cases.
With rising inflation, gold typically increases, when investors realize that their money is losing value, they will start positioning their investments. In a hard asset that has traditionally maintained its value most of the time. The 1970s present a prime example of rising gold prices in the present of rising inflation. In order to ascertain the investment merits of gold, let’s check its performance against that of S&P 500 for the past 10 years. Gold has performed very low compared to the S&P 500 in 10year period. With the S&P GSCI index generating 3, 27% compared to the The S&P 500, which has returned 10, 36% over the same period.
That said, gold trounced the S&P 500 in the 10year period, with a total price appreciation of 441%, or 18% annually too. On the other hand, appreciated by 58% over this period, point here is that gold is not always a good investment that’s for sure. The best time to invest in almost any asset is when there is negative and the asset is inexpensive. Providing substantial upside potential when it returns to favor, as indicated earlier too.
There are both advantages and disadvantages to every investment, but you are opposed to holding physical gold. Buying shares in a gold mining company may be a safer option in general. The believe is gold could be a safe alternative against money inflation, investing in coins, or jewelry are areas that you can use your gold. If your primary interest is in using leverage to profit from gold prices. Then futures market might be your answer, but note that there is a fair amount of risk involved with any leverage holdings.