Our fascination with gold is almost as old as the history of humanity itself. Its rise in prominence finally culminated when first golden coins officially became a currency in Asia Minor in 600s BC. Today, although it was replaced as a monetary unit a long time ago, gold still strongly affects national economies through its influence on official currencies. Still, in spite of its obvious value and significance in the overall economy picture, how does gold fare as an investment? Actually, it holds up pretty well.
A Very Long History of Holding Value
In the absence of a better term, gold is very reliable. Its history of holding value for more than 2,000 years makes it even more appealing than some national currencies to the chosen audience. Namely, people like to look at gold as heritage which will overcome all current economic turbulences, and be suitable to be passed on to future generations. Upon observing this issue from the long-term standpoint, this reasoning makes much more sense.
An Opportunity to Diversify the Investments
Putting all your eggs in one basket has never been a sound business decision. The more diversified your investments are, the bigger your chance of success. Investing in gold will give you an opportunity to do exactly that. Even when you opt for this particular kind of investment, dealers will offer you enough different options so you can further diversify your portfolio, and thus keep your investment more secure than if you didn’t.
Vulnerability of the Most Common Currencies
The US dollar and the entire US economy – the global economy in fact – has recovered from the crushing 2007-2008 global financial crisis. Still, no matter how encouraging current economic indicators might seem, it is just a matter of time when the next crisis will tear everything down again. Some economists are predicting the next great recession as soon as 2018. Even if we write off the more pessimistic predictions, it is obvious that the next great blow is going to happen sooner rather than later. In that case, having such a durable commodity as gold seems like a good idea.
Inflation
All currencies face inflation, and the US dollar is not excluded. Although we have not seen two-digit numbers since the 1980s, the inflation rate devaluates American currency each year. Historically, gold has been a great hedge against aggressive inflation, because when the costs of living increase, its value usually tends to rise.
Geopolitical Developments
Troublesome as they are, financial uncertainties are, unfortunately, not the only thing pushing gold into the focus of your investments. The other variables you should pay attention to are geopolitical developments, and as we can see, some decades-old geopolitical issues are far from being solved. Not only that, but a new crisis appears seemingly on a daily basis. It should be noted, therefore, that during similar situations in history, gold usually outperforms other investments and saw much better price movements.
Allure of Exotic Currencies
While gold will always be a smart investment because of its ability to hold value, exotic currencies have been attracting smart investors for a completely different reason. Namely, these currencies are currently worth very little and it is only a time before you get a massive return on your investment.
This may sound confusing, so let us explain.
Currencies like the Iraqi Dinar and the Vietnamese Dong are currently not faring well due to the complex situations in which these two economies are at the moment. The currencies are worth very little at the moment, meaning that you can purchase huge sums of these currencies without spending a fortune.
These two countries are bound to bounce back, especially Iraq which sits on spectacular deposits of oil. Once this happens, their currencies will be reevaluated and you will be able to what you bought at a fantastic profit. In short, when you buy Iraqi currency, you are setting yourself up for a massive payout down the line.
Old Romans used to say that “history is life’s teacher”. Well, if history has thought us anything, it’s that people will always value gold. Remember this important lesson and do not write off gold bars while planning your next great investments. Also, if you are up for something completely different, make sure to do some research on exotic currencies.