The Pros and Cons of Investing In and Owning Gold
By Lyle Boss
Throughout history, gold has easily been the most alluring of possessions. What are the pros and cons of owning gold today?
For ages, gold has been the standard of all financial wealth. That was also true for almost 200 years in the United States until President Nixon removed the US from the gold standard. Nevertheless, gold is as desirable today as it has ever been. Gold has been the source of temptation for people from all levels of life, today in India, gold is so sought after that not have gold can lower your social status.
Many people consider gold as the epitome of assets, the one thing to absolutely own and hold...or is it? Let's look at both sides of this issue, the pros and the cons of investing in and owning gold.
Along with the confidence level owning gold brings to the individual investor, gold has been considered a hedge against inflation at least in the older traditional sense. As a worldwide currency, gold, increases, and decreases based on global issues. Gold can still be the stabilizing factor. However, with world markets tied so closely via the internet, gold as an economic stabilizer doesn't quite carry the same power as it once did.
The Pros of Owning Gold
Gold is a physical possession, you can touch it, feel it and sell it. Gold is a mineral that will not ever tarnish, gold from 10,000 years ago looks exactly like it does today. Think of gold as a "safe haven", as a sort of alternative currency. Gold can be used as barter and as shown thought-out history, it can be used to buy and sell things.
Gold has limitations of the physical side, there is not any unlimited supply of gold in our world. There is a finite amount of gold. So theorists say that 95% of all available gold on earth has already been found and processed. Other say just the opposite, that out there somewhere is a lot more gold. Either way, there is a limit to how much gold there is on earth which can make supply and demand have a huge effect on gold prices.
Love: many people worldwide associate the giving and ownership of gold with love. This association between love and gold has to do with the demand for gold jewelry in many parts of the world. Gold has especially been in demand in many emerging markets where it is seen as a cultural and social expression.
Fear: gold is a nice warm blanket for those who fear any devastating world event such as a meltdown of financial markets. Gold was extremely popular to own in the months and years following the October 2008 meltdown of the American banking system. Gold prices soared during that time as gold was seen as a safe haven.
The Cons of Owning Gold
Some issues about gold ownership are both Pro and Con. The physical ownership of gold creates a space and storage issue as well as a need for security. Gold can be stolen and in almost any case it is completely untraceable. Gold is heavy, as well as difficult and expensive to transfer or move.
Gold can be a dead asset simply because of its limited commercial use. Unlike silver which has numerous commercial uses, gold just doesn't have the same utility use. Unlike real estate or other physical assets, gold has no earning power, you cannot rent out gold.
For many centuries gold was considered a superior asset class. Now, that argument becomes less and less valid because the cost to own gold in today's market can be expensive. Costs that the average investor might not be aware of, such as the cost to buy and the cost to sell gold. Then there are storage costs, transportation costs, and insurance costs.
The decision to own gold is based on your personal situation, those who fear the future are generally more inclined to buy and hold gold, those who have more confidence in the future are the opposite, they are less likely to hoard or own gold.
In a highly inflationary time, gold might be an excellent asset, but many other assets can and have accomplished the same objective, real estate is an example. If owning gold is an objective, only work with an established and authenticated source. One easy way to own gold is to acquire gold coins, make sure you know and trust the source.
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