What is so special about gold? It's a metal just like any other metal.
Tin, tungsten, copper etc are all metals but it is gold that is sought after and because it is always in demand. Because there is enormous demand which is far more than the supply available, gold is a priced commodity. Over centuries gold has been used as a primary form of money and has universal acceptance. All this translates into gold being a coveted asset.
Before I move any further here is a thought. We know that gold cannot be manufactured but what if there is some massive discovery of gold reserves? What if there was a scenario wherein there was abundant supply of gold?
Supply and demand of gold
Gold mining companies are mining gold in hundreds of tons and there are not enough buyers? A reversal scenario which is hard to imagine. But here is a somewhat related analogy; that of a precious stone. There was a time decades ago when this precious stone was a very high priced commodity.
The more you go back into history the higher was the price. It was a privilege to have a necklace of this precious stone something that only the ultra rich i.e. kings, queens and royalty could afford. Then people figured how mass scale production of this stone could be done without any compromise in characteristics and quality. What began as a motive of garnering more profit rapidly moved into a highly competitive industry and now this precious stone is sold by the kilo i.e. weight.
I am talking about pearls. A full natural pearl necklace can be bought for R 3000 to R 5000 these days vis-à-vis times when one would spend this much or more for a single pearl as buying a necklace was a dream.
As of today the human race considers gold as a priced commodity. It is sought after and is also considered as reserve currency for most nations and an asset of the last resort. There is ample demand for gold for industrial use as well as for domestic use especially in India and China. Demand is only soaring and thus expect gold price to move northward at variable pace from time to time.
Something very special about gold is the interesting options by which one could have gold in the portfolio. Such diversity in owning a single asset is only available in gold and no other asset class.
Options before the gold investors
* Gold Nuggets - dug out of rocks that may also contain silver
* Gold leaf - sheets of gold
* Gold bars and blocks - biscuits and other similar form of solid gold
* Gold Jewellery
* Regular gold: yellow gold used in making ornaments
* Black gold: chemically treated to become black
* White gold: chemically treated to become white in colour
* Rose gold: chemically treated to be rusty or red in colour
* Gold coins: gold that is used to make coins having a numismatic value
* Digital gold or E-Gold: Gold that can be held in commodities demat form
* Gold mining companies
* Gold ETF:
Buy units in your existing demat account.
Investing in gold: Several options
The best investment in gold in my view would be to buy gold collectibles. These could be ancient coins from around the world, artifacts, idols, work of craft or anything that could be of interest to a collector. The rarer and more ancient it is; the higher the price it dictates. Next consider investment in shares of gold mining companies. The cost of mining does not change with changing international price of gold.
Many like to buy physical gold but liquidity is not easy not to mention loss of value while encashment. Gold in demat form would be a far better option if investment is the only objective. Yet another option is gold ETF (exchange traded fund) or a mutual fund scheme investing in gold on behalf of many investors like you.
The least profitable form of gold investment is jewellery exception being that you intend to use or consume the jewellery.
Gold as a wealth protector
Gold is a wealth protector and suitable for someone who does not have a need for creating wealth. Gold maintains wealth; historical evidence shows that gold moves in line with inflation in the worst case scenario. So should one invest? The answer is “yes”. Will it reach $2,000 per ounce? The answer is yes again. When? That is hard to say but it will reach even $3,000 as long as demand stays robust.
The shining bright metal has been the fancy of individuals for centuries and there is not even the remotest of signs that this shinning metal may lose its sheen anytime soon.
