What is the expectation when investing in gold? Posted by James Randolph on September 13, 2011
Investing in Gold: Is it Worth it? Part 1
September 13, 2011 – What is the expectation when investing in gold? These days, investors can entrust their money and thought into a wide variety of preferences when the decision has been made to capitalize with gold. The alternatives to buying physical gold range from exchange-traded funds (ETFs) to gold stocks. But what is it about the gold market that attracts people?
Well, the answer to the first and last question in the previous paragraph lies in opposing views:
- First of all, there is the opinion that gold is something of the past that does not possess any long-lasting monitory potential. Our contemporary setting establishes gold’s only advantage as being a metal that is used in trinkets.
- Then there are those that declare that gold is a useful resource with numerous inherent potentials that make it rare and essential enough to be part of a profitable diversified portfolio.
To be able to appreciate the very reason for gold, we must turn to the beginning. The gold market didn’t commence until 560 B.C., despite its past going as far back as 3000 B.C. when ancient Egyptians began crafting jewelry. But let’s return to 560 B.C. which is when gold began its currency undertaking.
It was precisely in this period that traders wanted to generate a homogeneous and easily exchangeable form of money that would facilitate trade. The conception of a gold coin imprinted with a seal appeared to be the solution because jewelry made from gold was already recognized and acknowledged in many important parts of the world.
With the entrance of gold as currency, it quickly became increasingly reputable. Our global history has instances of gold’s effect in many empires, like the Greek and Roman empires. Great Britain industrialized its own metal-based currency in 1066. The British pound (representing a pound of sterling silver), shillings, and pence were all founded on the quantity of gold (or silver) that it symbolized. All over Europe, Asia, Africa and the Americas, owning gold finally became the equivalent of prosperity.
In the late 1700s, US policymakers instituted a bimetallic standard. It merely quantified that all monetary units in the United States had to be supported by either gold or silver.
- An illustration of this is when one U.S. dollar was the equivalent of 24.75 grains of gold meaning the coins that were used as money merely symbolized the gold (or silver) that was currently deposited at the bank.
Nothing in life can resume without obstacles and the gold standard was no exception. The 1900s brought several crucial happenings that ultimately headed to the conversion of gold reduced from monetary system.
- The Federal Reserve was founded in 1913 and began promulgating promissory notes. These notes guaranteed that the paper could be exchanged in gold whenever needed.
- In 1934, the Gold Reserve Act provided the U.S. government title to all the gold coins in circulation and culminated the minting of any new gold coins. This move instigated the idea that gold or gold coins were not at all compulsory in serving as money.
- Finally, in 1971, America relinquished the gold standard when the U.S. currency concluded its backing by gold.
Senior Staff Writer – Certified Gold Exchange