One investment class which has found buyers across all generations and category of people is Gold. Often people ask me whether it’s a good time to buy gold now. There is no definition of “now” as whenever you want to buy gold, it’s a good time. You are buying into an appreciating asset and disregarding the short term price fluctuations in gold, you would never lose money in the metal.
There have been fables and dynasties built on this yellow metal. Gold has attracted the attention of man since the days of the Gold Rush when people risked their lives in the hope of making it big with the discovery of some gold mine. Over the generations, the yellow metal has found a place of eminence among the asset classes on account of its never ending demand. There are some facts which one should know about the metal before they commit there hard earned money on the shiny metal.
Gold is an inert chemical element and is one of the most malleable and ductile metal known. The metal retains its shine and colour even when exposed to air and water and that adds to its value as storehouse of wealth. The supply of gold is limited on earth and unlike fossil fuels, it does not get formed through the chemical reaction of the basic materials (carbon, oxygen, nitrogen and hydrogen). Moreover gold once mined remains above earth in some form or the other…. Jewellery, Gold bars, Coins, industrial machines, etc. Till date around 165,000 tonnes of gold has been mined.
Gold has been widely used throughout the world as a vehicle for monetary exchange, either by issuance and recognition of gold coins or other bare metal quantities, or through gold-convertible paper instruments by establishing gold standards in which the total value of issued money is represented in a store of gold reserves. Gold has been fascinating mankind since ages. Egyptian hieroglyphs from as early as 2600 BC describe gold, which king Tushratta of the Mitanni claimed was "more plentiful than dirt" in Egypt. Gold is mentioned frequently in the Old Testament, starting with Genesis 2:11 (at Havilah) and is included with the gifts of the magi in the first chapters of Matthew New Testament. The Book of Revelation 21:21 describes the city of New Jerusalem as having streets "made of pure gold, clear as crystal".
A recent report ranked the central governments of different countries according to their gold reserves. No wonder, US Govt. topped the list with close to 8900 tonnes of gold reserves. India was ranked 12th on the list, but when it comes to gold consumption, no country can match up to India as far as the demand for gold is concerned. India consumes nearly 25% of the gold produced each year mainly in the form of jewellery. So if we consider both the government reserves and gold in the form of jewellery with the citizens, I am sure India would top the charts comfortably. It goes without saying how Indians have always realized the true value of gold which many countries are now realizing considering the weakness in the dollar which has been the measure of a government’s reserves.
Gold investment worldwide has grown dramatically in the last five years, but compared with the total stock of financial assets, gold bullion investment is still just a tiny proportion. Several factors are now stimulating gold investment by new pension fund money - as well as by private investors. Sales of gold jewelry across Asia are surging as the local economies boom and private investment grows. China's gold investment demand grew by 20% in 2009, while Indian consumers bought a record 900 tonnes – well over one-fifth of the total world market. Gold buyers in Asia tend to think of their jewelry as a form of gold investment. Prevented from owning gold bullion until very recently, they buy gold to protect their savings from inflation and currency shocks. That's why the most popular form of gold jewelry in Asia – heavy chains and bracelets – is known as "investment jewelry" in the gold industry.
Gold mining companies worldwide have failed to meet the growing demand from gold jewelry and gold investment buyers, pushing the gold price steadily higher. The world's No.1 gold mining nation, South Africa, has seen its annual gold output halve since 1998, and new operations in China and Russia - though growing - have failed to pick up the slack. According to consultants "Virtual Metals" total world mining output has fallen by 4% since 2003. Their gold investment analysts don't forecast an early return to growing output.
The surge in crude oil prices has closely matched the gains in gold prices since 2003, but many people now thinking about gold investment will also want to consider the surge in world food prices, the boom in base metals such as copper, and the current all-time highs in the cost of shipping. Rising demand for better housing and durable goods from Asian consumers is certainly a factor. But many gold investment analysts also point to the huge growth in credit and debt in the West. The money supply in the United States has doubled in the last seven years. In Europe, growth in the money supply hit a near-30 year record in late 2007, increasing the appeal of gold investment as the value of each Euro in circulation threatens to shrink under the weight of new notes and electronic account balances.
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