Let’s talk about Gold. Why gold? To invest in gold means there is a safer cushion to the regular Joe in the ups and downs of our economy. Because gold is tangible. It is not paper. It is not a paper promise backed by financial institutions to pay in the future.  It is something that can be liquidated and still get the same or higher value from the time it is bought.

Why buy Gold?

Because history teaches that when oil prices go up, gold prices follow accordingly. When prices inflate,  the same goes for gold.

There have been two major upward moves in the price of gold since it was freed to float in 1968. The first occurred between 1972 and 1974 when oil prices climbed 325%, from $2.44 to $10.36. During the same period, gold prices rose 268% (on a quarterly average basis) from $47.45 to $174.76.

The second major price move occurred between 1978 and 1980, when oil prices increased 105%, from $12.70 to $26.00. Over the same period, quarterly average gold prices rose 254% from $178.33 to $631.40.

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It is also a a counterbalance in times when the dollar is declining. Does anyone remember seeing the bags and bags of Japanese money that the occupation left when they invaded the Philippines? These ‘money’ were just paper and justly called Puppet Money. They were useless. If that time comes, gold would still have the same value before and after any occupation, deflation or economic crisis.

When economies fail, people tend to rely on gold because of its lower risk factor.  Even owning paper money can become worthless if  the government in panic prints up money to feed the economy without any tangible asset to back it up. Thus people tend to buy gold which in turn acts more like a stable currency than that of paper with only a promise and no commodity to back it up. Gold holds its value. It has and will hold its purchasing power over any monetary invention by mankind. This is not to say that we scrap paper money altogether.

This brings me to the point that not all investments should be focused on gold. It is said that a diversified investment portfolio is a practice in common sense. We still live in the real world anyway and we still need to pay our bills with a money. It is also good to protect investments on stocks and bonds in case we run the risk of default by the issuer. It is an insurance to investments.

As the supply of gold dwindles around the globe, gold has become a precious commodity demanding a higher price in the market. The latest number for 2008 is that US Mint reported that the sale of 1 oz. US Eagle Bullion Coin soared to 104,000 pcs./1oz. last October from 91,000 pcs./1oz. of September. They produced a  memorandum stating that: “gold and silver demand is unprecedented.”

And the good news is gold is still a hard to track investment when the government wants to dip into our personal finances, publish our business and personal lives on a database. It is still an commodity that is hard to track as many regular people would buy them from auctions, coin dealers and trade shows and would usually keep them under lock and key in their own homes. The gold investor is not obliged to report his owning a stash of bullions or a few coins to the government. He is only required to provide information as to his profit and loss at the time when he chooses to liquidate this commodity.

There are many other uses for gold: the Central Bank, industrial conductive material, and jewelry (the highest buyer of gold). These are supplied from Central Bank (funny, they buy what they sell), gold mines and prospectors, and scraps.

Why has gold played a key part in our economies? It is just a yellow metal that does not fade. Probably because it is at best portable, it is stable and humankind has always viewed it with such honor and value.

The dictionary definition of gold is a precious yellow metallic element, highly malleable and ductile, and not subject to oxidation or corrosion. Symbol: Au; atomic weight: 196.967; atomic number: 79; specific gravity: 19.3 at 20°C.

This is not a professional financial advice on diversification of investments. If you are thinking of putting your money on any kind of investment, it is suggested to educate and research every information regarding your financial step.

1The LORD said to Moses, 2 “Speak to the people of Israel, that they take for me a contribution. From every man whose heart moves him you shall receive the contribution for me. 3And this is the contribution that you shall receive from them: gold, silver, and bronze, 4 blue and purple and scarlet yarns and fine twined linen, goats’ hair, 5tanned rams’ skins, goatskins, acacia wood, 6 oil for the lamps, spices for the anointing oil and for the fragrant incense, 7onyx stones, and stones for setting, for the ephod and for the breastpiece. 8And let them make me a sanctuary, that I may dwell in their midst.

Exodus 25:1-8