Gold is known for its intrinsic beauty, warmth, sensuality and spiritual richness. But it is also one of the best investments. That is what makes Gold so coveted. Gold ornaments have been in existence since 4000 BC. Wars have been fought and people have lost their lives over Gold over the years.
The present World Monetary System, like its predecessors, is founded on Gold held in treasuries or Central Banks. World Central Bank holdings of Gold at market price constitute one part of World International Monetary Reserves. Gold is inversely correlated to the US dollar, making it a good currency hedge. Anytime Dollar weakens, people switch over to Gold, as is happening now. Gold is the only reserve asset that is no one's liability, and is perhaps the only true Global currency. Unlike a paper currency, the value of gold cannot be affected by the economic policies of the a country or undermined by inflation in any country.. It can be traded anywhere in the World on any given day and it does have an intrinsic value.
Gold has always been dear to the people from developing countries, especially Indians. The lure of the glittering yellow metal is hard to resist. All over India, Gold is synonymous with wealth. Gold coins, bars and high-carat jewelry play a crucial role as a means of saving and defense against misfortune to many of the poor of the world. Gold is the benchmark as far as excellence is considered. It is why we have Gold Medals for the winners in any field.
Gold, perhaps, is the best possible protection against upheaval, both political and economic. Gold is an effective hedge against inflation. It provides sufficient liquidity and gives people a feeling of security. For the women, who are not working, jewelry is perhaps the only asset she owns in real terms. Something they can fall back in times of adversity. Added to the fact that it is a means of savings, Gold also has the advantage of being used as an ornament to augment the beauty of the women. The use of jewelry as savings is often important in rural areas where access to a reliable and appropriate banking system is difficult or impossible. Giving Gold as a Gift is considered to be the ideal token of love and respect, perhaps matched only by Diamond. Not many know, but Gold is bio-compatible, making it invaluable in medical implants. It also does not corrode or tarnish, making it invaluable in industrial applications. Gold is used in pharmaceutical industry extensively.
Gold offers protection against a weak currency or high domestic inflation levels, something people have realized in these troubled financial times. Historically, Gold has always been found to be a safe bet whenever there is an economic downturn. People have a psychological feeling that the yellow metal is a safe haven in troubled times. And they are correct. In the current scenario of global financial meltdown, there is hardly any other option available for the investor. He doesn’t see much logic in investing in Stock market which is at rock bottom currently, the real estate has been badly hit, banks and financial institutions have lost their credibility and also the interest rates are so low, it doesn’t make sense to lock your money in bank savings.
The only alternative is Gold. Apart from the retail investors, the institutional investors are also buying gold in large quantities as they do not trust the valuation of any other asset. Added to this, the oil prices are at a rock bottom. Again traditionally, gold prices are inversely linked to oil prices. Finally, the production of gold has stagnated during the past few years. Supply constraints and demand increase obviously means rise in prices of gold.
The World is going through one of the greatest recessions seen in recent times. But during this period when every other single investment has shown a negative return on investment, Gold has appreciated by more than 75%
That is the power of Gold, your loyal friend in good and bad times - (This article written by me was originally published in Powerbiz, IGNOU Kuwait E-Magazine, issue dated April 2009)
