Gold & Silver
Investments That Stand The Test Of Time
Why Invest In Gold & Silver?
In an historical context it is only in recent times that the use of physical gold coins as the primary medium of exchange was replaced by a system of paper currencies. Even then, the value of the notes was directly linked to the value of gold as each note issued was a promise to the bearer that they could be swapped for the equivalent value of gold. In the case of the US dollar, one dollar represented 1/500th of a an ounce of gold. For this reason, countries were required to hold physical gold to the value of the money it had in circulation limiting the supply of bank notes giving the currency a stable value and exchange rate. This is known as the Gold Standard.
In 1930’s the US and UK ended the gold standard by introducing fiat money (government backed currency). This theoretically allows unlimited number of dollars to be created with the value of the currency reflecting the stability of the country issuing it and the supply/demand for that currency. Other countries followed suit and fiat currency is now the norm. This freedom creates potential problems, however. One example has been hyperinflation as an oversupply reduces the value of the asset. The UK and US along with many other countries have recently embarked on a period of quantitative easing; effectively placing more and more of their home currency in the money supply making people nervous about the prospect of inflation and the reduction in value of tie cash. That is partly responsible for the rise in the value of hard assets such as Gold, Shares, Property and Crypto etc as investors are converting their cash with its diminishing purchasing power into real assets that have a finite supply and will keep pace with inflation.
Long term price of gold
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Gold. A Long Term Favourite
Gold has long been a firm favourite with investors and held in many professional and retail portfolios as a hedge against a falling currency. Here are 7 good reasons why people continue to hold Gold and the Gold price continues to rise:
- Gold and Silver have been held as a store of value and as a medium of exchange for longer than any other asset worldwide with worldwide demand.
- Gold is less volatile than other alternative mediums of exchange, ten times less volatile than Bitcoin for example, an important factor when holding it as a store of value.
- Gold and Silver are used in industry and jewellery, heavily used by technology companies maintaining upward price pressure.
- Gold and Silver supply are finite and cannot be debased or destroyed.
- The total amount of gold ever mined is estimated at 190,000 tonnes, equivalent to just 3 Olympic sized swimming pools in volume, with only 54,000 tonnes of minable gold increasingly expensive to mine remaining in the earth’s crust.
- Gold is a good hedge to a falling stock market, generally rising during market crashes.
- Gold is highly liquid with a ready secondary market. Coins can be converted to cash same day worldwide.