Gold Investment History
Since the emergence of the stock markets, gold has developed a reputation for having an inverse relationship with equities and a positive relationship with inflation. However, the history of gold as a financial asset and a store of value dates back far further.
Gold was first used as money in coins approximately 550 BC, but it was already well-known as a symbol of riches before that. Gold has been associated with wealth and power for many millennia, as evidenced by the discovery of gold-containing treasures as early as 4000 BC.
The value of gold in modern finance did not, however, increase until the late 1800s. The gold standard, which ties the value of a country’s currency to the price of gold, was embraced by the majority of countries. Since then, the gold standard has been abandoned and reinstated in numerous nations before being finally supplanted in 1971 by freely floating fiat currencies.
Prior to the financial crisis of 2008, the price of gold was very stable; nevertheless, in the years that followed, it increased, going from about £15 to £30 per gram. The implementation of quantitative easing (QE) by central banks was the cause of this price increase. The overall argument that QE causes inflation, and gold prices often increase along with inflation, supports the increase in gold’s value.
Why Should I Invest Gold?
Preservation of wealth. Many investors have confidence in gold because of its ability to preserve money. Think about the difference between possessing a £50 note and £50 worth of gold in 1980. Since then, gold’s value has increased, making it far more valuable than the initial £50 investment. However, the value of the £50 note has not increased, and as a result of inflation, it no longer has the purchasing power it did in 1980.
Hedge. Along with rising inflation rates and a weaker dollar, gold prices frequently rise. As a result, when investors realize they are losing money, they may attempt to purchase gold as a hedging asset. This is consistent with the general principle that when the value of the dollar declines, gold frequently retains or even increases in value. Find out more about currency hedging.
Stability. Gold is not immediately affected by changes in interest rates, and its supply and demand cannot be manipulated by printing more of it. Gold is a valuable asset that has held its value over time and has demonstrated its value as an insurance policy in times of economic uncertainty. As a result, many investors view gold as a safe haven.
Diversity of holdings. Due to their frequent negative correlation with the stock market, diversification assets like gold are frequently included in a balanced portfolio. For investors, a broad investment portfolio helps to lower risk and volatility.
Opportunities for gold stocks. The price changes of the precious metal, gold, typically reflect some of the values of gold stocks. Gold stocks, however, can continue to be profitable even when gold prices are low. Many gold mining businesses also provide generous dividends, which can serve as an additional incentive for investors to purchase gold stocks rather than physical gold. A list of the best gold stocks and ETFs to follow is available.