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Is Buying Gold As Investment a Good Idea?

This small article was inspired by a friend of mine. He asked me the question whether, in my view, it was a good idea to invest in gold. I answered yes, before specifying a number of things which I will now entrust to you.

Gold is not regarded as an investment, but very often as the ultimate resort in times of crisis. And we are living in one!

Gold does not suffer from the defects of other investments, bonds, shares and real estate.

Unlike bonds, it does not generate interest but it does not represent anyones debt, so it can effectively can be considered as as having an AAA rating!

Unlike stocks or shares, it does not represent a company, does not have personnel to pay, does not have a board of directors, manufactures nothing and does not provide any service.

Contrary to real estate, it is not for rent, it does not require any maintenance and is not subjected to property taxes.

These three facts explain why, when bonds, stocks and/or real estate "shine all their lights", gold is neglected because it does yield anything.

Why? It is necessary to go back a little in history to understand.

Since the Breton Woods agreement of July 1944, gold lost its status as the international currencies to the advantage of the US dollar (USD).

It is regarded today as simply a “raw material” in the same capacity as corn, oil, metals, livestock, fruit juices, etc.

All raw materials are used by definition, to produce other things: With oil (which is refined) various fuels, with animals and plants, food for us humans, etc. But with gold? One is obviously tempted to answer "jewels", but gold is not only that!

First, and especially because gold is a virtually indestructible element.

The wheat used to make the bread disappears at the moment of its transformation into food; crops may be good or bad, according to climatic variations and lead to a shortage or surplus. Oil, as is realised every day, exists in a finite quantity which is diminishing as a natural resource and will eventually disappear (and also causes atmospheric pollution).

Gold, will never disappear. It can be melted to ingots, transformed into a jewellery, into gold leaf for covers for luxury books, but it cannot disappear.

It is these characteristics of permanence that has made investors, from time immemorial, rely on gold during all bad periods. And we live in one at present!

The result is shown in a few figures:

  • In January 2005, gold was less than $450 an once (i.e. 28.279 g).
  • In January 2006, it was approximately $550 per once.
  • In January 2007, almost $630 per once.
  • And today in 2009 it is above $800 per once.

Personally, given the announcement of the failure of numerous banks in the European Union etc, I see it definitely going to $1,000 per ounce and certain analysts specializing in gold project it to $2,0000 per ounce in the relatively near future.

So, if you have the opportunity, buy some gold. In my view, not gold on paper (stocks of gold mines etc), but the actual metal itself (long live the ingot! but also the Krugerrand and other coins, including foreign ones).

This is certainly surprising advice at a so-called time of dematerialisation of financial assets such as stocks and bonds and, moreover, derivative products, but it is a piece of advice for security!

Author: Guy Poursin, webmaster of
Provided by ArticlesEnLigne.

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