Sunday, May 23, 2010

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Why Gold is a Good Investment

You might think why should I invest in gold, it doesn't pay me an interest, it's not backed by the government such as US bonds and it's subjected to wild volatility. Oh! By the way it's at an all time high!


Some people I talk to wonder if they've missed the boat in gold. They fear they've waited too long to buy gold stocks or there hasn't been a significant pullback in price to enter. When you look at the grand scheme of things, buying at these levels will be so insignificant 2-5 years ahead; gold is in a secular bull market. Buying gold as an investment for the purpose to preserve your wealth for what is too come is wise. Trading gold to make quick profits is not worth the stress; leave it up to the professional traders. I strongly believe the greatest wealth shift will happen in the coming years.

It's not too late to buy gold; ask your friends and family about gold as an investment, more likely they are not interested or they don't know about it. This is the way you want it, when the masses are not looking you are accumulating. There will be at some point in time where everyone will be talking about gold, your friends, family your neighbor even the taxi driver; it would be a mad frenzy to buy the golden relic. By that time you will know it's time to sell out. At the moment we are still far from that euphoric phase.




Why invest?


The U.S. dollar - Since July 2001, the US dollar has plummeted as much as 36 percent against other major world currencies, and there's plenty of room for the dollar to keep falling. The massive U.S. government debt of $12.5 trillion, bailout commitments and guarantees from the U.S. Treasury and the Federal Reserve equaling almost $13 trillion, a massive spending budget of $3.8 trillion and other government financial obligations is going to help push the dollar even further down the slope. Since gold is priced in dollars, as the dollar goes down, gold usually goes up.

Gold in financial products - As the global financial crisis has worsened, investors have fled to the safe-haven of gold. In 2008, 320.9 metric tons of gold flowed into Exchange Traded Funds (ETFs), a 27 percent increase over a year earlier. ETFs continued to grow in 2009 as investors bought a record 594.7 metric tons, an 85 percent increase over '08. As of October 2009, the total holding in ETFs was 1,750 metric tons, worth more than $48.6 billion. ETFs and similar products are now listed in exchanges in 12 countries.



Gold in China and India - In 2007, China overtook the United States as the second-largest gold consumer in the world. Consumer demand reached 427.5 tons in 2009 - nine percent higher than 2008. China consumes more gold than it produces - this couldn't be more bullish for gold. The World Gold Council (WGC) forecasts that gold consumption in China could double in the coming decade as a result of rising demand for jewelry, hard-asset investments and industrial uses. China has reported it's boosted its gold reserves by 76 percent to 1,054 metric tons, becoming the world's fifth-largest holder of gold.

India's central bank recently purchased 200 tons of gold for $6.7 billion! India is the world's largest consumer of gold in tonnage terms, accounting for about 23 percent of global gold jewelry demand and about 11 percent of global net retail investment (gold bars and coins).

Gold supplies are shrinking - The U.S. Geological Survey - a division of the Department of the Interior - recently announced that there are now fewer than 50,000 tons of proven gold reserves left in the ground worldwide that the world will run out of in-ground supplies of gold within 20 years. South Africa and Australia had the steepest production declines. South Africa's production dropping to its lowest level in 86 years, while Australia's gold production hit 19-year lows. And mine production has the potential to fall even further as the credit crisis continues to impact mining companies.



• Source: http://ezinearticles.com/?Why-Gold-is-a-Good-Investment&id=4275201

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