Why Gold
History and Perception
Since as early as biblical times, gold has always been perceived as a very special commodity. It is the first and most often referred to metal in the Bible, highly valued for its weight, durability and astounding beauty. In effect, it is the noble metal. From the construction of the Tabernacle through to the building of Solomon's Temple, gold has been revered, even being used as a fine thread in garments for the high priests. That most sacred of religious artefacts, the Ark of the Covenant was made of gold.
Throughout history, the rarity of this precious metal has always given it a monetary value, which in turn has allowed it to become important in commercial transactions as well as being a measure of wealth.
Gold Rush
Throughout time, man has put his body on the line to mine and refine gold. The California Gold Rush which took place from 1848-1855 brought people to the area in their thousands after gold was found. These gold-seekers, known as "forty niners" (after 1849) came from across the globe as they sought to make their fortunes. Some succeeded, yet the mystical allure of the metal still lingered. It still remains the world's most favourite metal.
A Safe Bet
In modern terminology, gold ticks all the boxes. As a metal in its own right, it holds its own and much of its metallic value is down to its lack of reactivity. It can also be used sparingly for electrical contacts and, of course, has practical uses in dentistry. It's not all 'Del Boy' from 'Only Fools and Horses', dripping with dodgy jewellery! Gold is insoluble in nitric acid, unlike silver and base metals such as copper, lead, nickel and zinc. From this scientific fact comes that well known of phrases, 'passing the acid test'.
When it comes to financial reliability, gold certainly passes the 'acid test'. Throughout history, kings and queens, emperors and rulers, governments and financial institutions have always relied upon and trusted gold to maintain its value. Gold did what other metals couldn't. Most of the others were too corrosive, gaseous or reactive or in too much supply. If other metals fitted the bill physically, they weren't scarce enough to be of any real value.
As a physical asset in finite supply, gold has traditionally been viewed as a good bet against inflation, unlike bonds or cash, for example, which can be issued or printed at will. It used to be viewed as a way of hanging on to what you had as opposed to being a vehicle for making money.
The Shift Toward Investment
The price of gold has risen every year for the past 10 years and is showing no signs of abating. As it has risen fivefold in that time, the surge in price is changing the investment opportunities gold has to offer. If, in the past, it was always the sensible route, now it's so much more than that.
So, is this likely to continue and make gold, as opposed to other metals, the primary opportunity for investment? Given that short-term factors such as political unrest or low interest rates will always have a market effect, there are three related facts that seem to support this unmistakeable and continuing rise of the value of gold.
Firstly, with monetary systems driving higher inflation rates pretty much across the globe, gold is becoming even more attractive. Gold is still the classic counterweight to the scale of rising prices.
Secondly, with global currencies relatively inconsistent at the moment, they no longer offer such a safe haven for investors' money. The massive debt in the US has weakened the dollar and the value of the euro is suffering through issues arising with some of its member states. Again, gold comes into its own as the real alternative.
Thirdly, with weakening Western economies and increasing growth in the East, the future of the global economy sits uneasily. Gold has always stood the test of time.
Other Opportunities for Gold
The emerging economic powerhouses that are China and India are having other effects on the demand for gold. As each of these countries develop, the demand for gold increases. The burgeoning middle classes with their newfound wealth and status are creating an increased demand for gold jewellery. Also, the central banks in these two countries are investing in gold bars.
In summation, other metals just don't have the qualities gold has on all levels. Gold is historically tried and tested, both for its physical properties and as a financial 'barometer'. This barometer has moved from the safe haven, through to an important investment opportunity and now, with the economic global shifts, a sure-fire winner.
