In the backdrop of high demand for commodities in developing economies, various managed investment funds, index funds, and ETFs have emerged to represent a wide range of commodities, including oil, coal, iron, steel, base metals, agricultural commodities, and related companies. Additionally, precious metals such as gold, silver, and platinum have gained popularity as traded commodities. While industrial applications contribute to their demand, gold and silver, in particular, have historical significance as stores of value, especially during turbulent financial periods.
The Timeless Value of Gold
Unlike paper currencies that lose value over time due to increased supply by governments and central banks, gold maintains its intrinsic value. Over centuries, an ounce of gold could buy items of significant worth, and this holds true even in modern times. Its value has remained stable despite economic fluctuations, making it a reliable store of wealth.
Price Volatility and Recent Trends
Gold prices have experienced notable volatility over the years. The 1980 peak of $612.56 per ounce significantly dropped until the late 1990s. However, from 2001 to 2012, gold prices steadily rose, driven by global central banks’ actions to counter the effects of various economic crises. More recently, gold prices soared during the global pandemic and the Ukraine war, only to settle down after Central Banks intervened to address inflation.
Gold as a Hedge and Investment Option
Amidst political turmoil or monetary expansion by central banks, investors find gold attractive as a small portion of their portfolios. It serves as a safe haven, protecting against currency depreciation. Though not a tradable currency, physical gold remains a convertible asset of value.
Methods of Owning Gold
Investors now have easier access to gold through Exchange Traded Funds (ETFs), which track the price of an ounce of gold in US dollars and are available for purchase as shares on stock markets. Physical gold coins and bullion can also be bought and stored through bullion dealers or via certificates issued by reputable institutions.
Considerations for Investors
Investors must clarify their motives for investing in gold. Are they speculating on its price or seeking a longer-term hedge against potential declines in other asset values? It’s essential to remember that gold does not generate dividends and its price can fluctuate over time.
The Volatility of Silver
Silver’s value is more volatile than gold due to its industrial uses and historical monetary significance. Its price surged to an all-time high in 2011 but later stabilized at a lower level. As of late, it has remained within a certain range, reflecting its volatile nature.
Gold continues to hold its allure as a reliable store of value, especially during uncertain economic times. Investors should carefully consider their investment objectives before including gold in their portfolios. Similarly, the unique attributes of silver make it a distinct commodity to be approached with caution.
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