Why Gold Is A Smart Investment

Investors who are new to gold will surely feel the thrill of seeing and holding their first stock of physical gold. Valuable coins and bars have a beauty and lure that that has dazzled monarchs and common folk alike.

Like any commodity, the value of gold rises with demand and falls with supply. But, unlike other commodities, there is a limed supply of gold, you can’t just make more of it. Yes, more can be mined, but not at the rate that it is demanded. And, there is a virtually unlimited amount of demand for gold because of gold’s historic and ever-rising value.

Gold is usually in a strong bull market. The definition of a bull market is one that has gains of 20% or more a year. Since 2000 alone the gold market has had on average gain of 202% per year. Gold has made a fortune for those wise enough to invest.

In 2006 CNN Money did an article on the current ‘gold rush’, but that was nothing compared to the demand that we have seen over the past few years. Anybody that bought during the 2006 ‘rush’ would have made a lot of money during the next rushes that occurred in mid-2008 and again earlier this year.

Why does gold’s value rise so fast?

Well, part of it is the mining issue I mentioned earlier. The world’s mines produce about 2,500 metric tons of gold a year. The world demands between 4,000 and 5,000 metric tons of gold a year. Gold demand outstrips demand by 60% to 100% every year.

The world’s banks were allowed to sell there supply after the end of the gold standard, which was a system that forced countries to back their currency with physical stores of gold. From the mind 1960s to the late 1990s, banks released enough gold to marginally keep up with the worlds demand. By 2001 the banks had run out of their massive stores, and the demand for gold skyrocketed.

Right now is a strategically critical time to invest in gold. The arrival of online trading and increased interest in gold as an investment may eventually bring the market into an equilibrium that results in a higher gold price. Jumping into the market right now means buying gold at price that should prove to be historically low.

Gold can be seen as insurance, it will always be worth something, no matter what else happens in the world. Mighty stocks can plunge to zero, inflation can render the dollar worthless, bond interest rates can fluctuate, but gold will always be valuable.

The gold that you buy today will be able to buy the same amount of goods, if not more, in the future. Your grandchildren and great grandchildren will be able to reap the benefits of your gold investment.

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