Own Gold? Some Good Reasons Why You Might Consider It

(eToro Blog) Worldwide, gold is held with high esteem and respect for not just its value but its historical connotations. It’s been used as a form of currency for thousands of years and over the past few centuries its importance and relevance has increased. There are a number of good reasons to own gold and we expand on the most relevant.

• Gold holds its value: Unlike other assets like paper currency or coins, gold has generally maintained its value throughout time; investors see it as a way to preserve their wealth, or pass it on from heir to heir.
• Gold is a hedge against U.S. Dollar weakness: Historically, as the U.S. Dollar depreciated relative to other currencies, investors sought gold as a safe haven and helped to push prices higher. In a 10-year period, between 1998 and 2008, gold prices nearly tripled; in the 4-years between 2008 and 2012, gold prices have nearly doubled.
• Gold is a hedge against inflation: Gold prices tend to rise when inflation or the cost of living rises; historical records show that during the five years which had the highest inflation rates the average real return of the DJ30 was just above 12% as compared to 130% for gold.
• Gold is seen as a safe haven during geopolitical turmoil: Gold, the “crisis commodity,” benefits during periods of political uncertainty, as is clearly seen with the uptrend as a result of the Eurozone debt crisis and when confidence erodes in a government.
• Gold has Rising Demand and Fixed Supply: Emerging market economies, central banks, investors, and end-users are all supporting the rise in demand for gold even as mining output continues to be on a decline. Demand for the shiny stuff as an investment class has grown tremendously; within a period of four years and to date, SPDR Gold Trust has become one of the biggest gold bullion holders in the world, not to mention among the largest ETFs in the United States.

Though there are some analysts who believe that gold prices are likely to stagnate before too long, the majority still believe there’s a lot of room for prices to rise and the per ounce price could meet $2,000 before too long. For the time being at least, OpenBook’s gold trade believes that, too with overwhelming bullish sentiment.

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