Why gold is good as gold

Gold is the stuff that dreams are made of, including a great many Hollywood movies, stage plays and real life events. Who doesn’t like gold?

Then again, maybe it is all of the things that gold buys that makes it so much in demand thousands of years before the birth of Jesus Christ? In that regard gold never loses its value.

Well, that is not necessarily true in the short term. However, in the long term, the value of an ounce of gold has increased, and it will continue to increase forever.

The main cause of such gold value increases is economic depressions and/or economic recessions that regularly occur in the industrial nations of the world. During economic recoveries, the value of an ounce of gold declines, but its value after such a decline is higher than what it was before those economic depressions or recessions.

These days investments in precious metals such as gold produce better returns than the interest paid by banks to customers who have money deposited within those banks in the form of savings accounts and certificates of deposit. That does not mean that all of your extra money should be invested in gold.

So too, there are many ways to purchase gold and the related industries that supply gold to the marketplace. You can buy the capital stock of gold mining companies.

You can buy a contract on the New York Commodities Exchange or COMEX to purchase a certain quantity of gold in the future at the current contract price.

You can buy gold coins from the mints of the countries that make gold coins, or you can purchase gold coins from private parties or coin dealers. For example, the U.S. Mint produces guaranteed fine gold coins.

You can buy jewelry that contains gold at a jewelry store or a department store that has a jewelry department. Second hand gold jewelry is also purchased from pawn shops or individuals.

To buy gold stocks and/or gold commodity contracts often entails opening an account with a stock broker or a commodities broker who works for an investment house that has seats on those exchanges. The purchase price for the stock or commodity will be subtracted from the money given to the investment house in the form of an investment account.

Money is also lost if the price of gold is less than the cost of a gold commodity contract at the expiration date of said contract. The future price speculation on any commodity contract is potentially very risky. In the short term, which is less than a year, an investor could easily lose all of the money put into such an investment account.

On the other hand, by simply buying gold in the form of coins and/or jewelry losing 100 percent or even 50 percent of the initial investment far less unlikely because gold will never become worthless.

Therefore, the average person is wise to purchase gold in the form of tangible personal property rather than in the form of intangible personal property. Gold can always be stored in a safe or a safety deposit box within a bank’s vault. Thus, that form of gold is tangible personal property.

Buying the capital stock of gold mining companies or commodity contracts is the ownership of intangible personal property and there is a possibility that complete loss of initial investment will occur. In other words, there may not even be one ounce of gold to show for the investment.

Lastly, gold is hedge against price inflation within any economy. The purchasing power of hard earned money is retained by buying gold because increases in the price of gold often offset decreases in the purchasing power of fiat currency.

To illustrate further, if there is 10 percent consumer price inflation, then only 90 percent of the price before inflation will be funded. However, money in the form of gold that has not dropped in value can buy the same amount prior to the 10 percent price inflation.

Keep in mind that the economy of any country can collapse. That means that the currency of that country will be worthless or its value will be greatly reduced. Such an event occurred in the form of hyper inflation in the Weimar Republic after World War I. Unlike currency, gold will likely never become worthless.