Investment In GoldWhat's In Store For The Price of Gold And The Dollar?

By: Rea Lea Osaka

The financial press, and even the network news shows, have started reporting the price of gold regularly. For almost twenty years, between 1980 and 2000, the bullion price was rarely mentioned. There was little interest, and the price was either falling or remaining steady.

Since 2001 however, interest in gold has spiked and so has its price. With the price well over $1000 an ounce, many more people are becoming interested in gold as an investment and an economic indicator. Much can be learned by understanding what the rising dollar price of gold indicates.

The rise in gold prices from under $300 per ounce in 2001 to over $1000 today has drawn investors and speculators into the precious metals market. Though many already have made handsome profits, buying gold per se should not be touted as a good investment. After all, gold earns no interest and its quality never changes. It’s static, and does not grow as sound investments should.

It’s more accurate to say that one might invest in a gold or silver mining company, where management, labor costs, and the nature of new discoveries all play a vital role in determining the quality of the investment and the profits made.

Buying gold and holding it is somewhat analogous to converting one’s savings into one hundred dollar bills and hiding them under the bed, althoughtyet not exactly the same. Both gold and dollars are considered money, and holding money does not constitute as an investment. There’s a major descrepancy between the two however, because by holding paper money one always loses purchasing power. The purchasing power of commodity money, i.e. gold, however, increases if the government devalues the circulating fiat currency.

Holding gold is hedge or insurance against government’s ideal to debase its currency. The purchasing power of gold goes up not because it’s a so-called good investment; it goes up in value only because the paper currency goes down in value. In our current situation, that means the U.S. dollar is weakening against gold.

One of the characteristics of commodity money (one that came about organically in business) is that it must serve as a store of value. Gold and silver meet that test, while, but paper money does not. Because of this major difference, the incentive and wisdom of holding emergency funds in the form of gold becomes a no-brainer when the official currency is being devalued. It’s smarter than trying to save wealth in the form of a fiat currency, even when earning some nominal interest, especially when this interest often attracts the highest taxation rate. The lack of earned interest on gold is not an issue when people realize the purchasing power of their currency is declining much higher rate than the interest rates they might get. The purchasing power of gold can rise even faster than increases in the cost of living.

It's probably an appropriate idea for you to diversify a part of your savings into gold bullion or even gold-backed securities like the Gold ETF. Experts advocate that everyone hold 10-15% of their investments in gold, although with the current economic situation, I'd definitely shoot for the high end of that range.

I particularly like collectible and rare coins instead of ordinary bullion coins. Historically, the US government has confiscated bullion coins. They do not however confiscate historic or collectible coins. For this reason I prefer old and rare gold coins, which don't really have a high premium right now. My favorites are the French Lucky Angels Gold Coins

Article Source: http://www.find-investment-advice.com

The writer hosts a site dedicated to Living Off Investments and is an avid Collector of European Gold Coins.

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