{"id":991,"date":"2013-07-23T14:31:58","date_gmt":"2013-07-23T14:31:58","guid":{"rendered":"http:\/\/vhfinancialmanagement.com\/?p=991"},"modified":"2013-07-25T16:02:50","modified_gmt":"2013-07-25T16:02:50","slug":"gold-as-an-investment","status":"publish","type":"post","link":"https:\/\/vhfinancialmanagement.com\/2013\/07\/23\/gold-as-an-investment","title":{"rendered":"Gold as an Investment"},"content":{"rendered":"
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It seems I see more and more commercials pedaling gold as an inflationary hedge. \u00a0Some aging actor comes on the TV and tells us that gold is the only investment for him, and it\u2019s safe.<\/p>\n

Safe must be a relative term because gold is down almost 30% from its high in 2012!<\/p>\n

While some people swear by their gold investments, we must understand how gold works as a part of our portfolio. First, gold is an investment and is speculative, but many people overlook this fact.\u00a0 Often people buy gold as a hedge against economic and political instability, but gold has risk.\u00a0 Since gold is also sold on the futures market and as a derivative, there will be fluctuations in price and market risk.<\/p>\n

Also remember that gold is no longer tied to our currency. \u00a0The United States ended the gold standard (backing our US dollar with gold) over 40 years ago. The US dollar is now considered a fiat currency (a currency backed only by the faith of a government). \u00a0The folks who buy gold as a political hedge believe physical gold will serve them well if our political system collapses.\u00a0 \u00a0In my personal opinion, I feel gold will only be of benefit in this situation if it has value, and value will be relative to supply and demand.\u00a0 If people want gold, there will be value\u2026\u2026but you can\u2019t eat or wear gold (at least not to stay warm).<\/p>\n

Again, it\u2019s is all relative to supply and demand.\u00a0 Gold\u2019s value comes from the lack of supply, so more people are willing to pay a higher price. \u00a0The world\u2019s mined supply would fit (depending on where you get your info) into a cube 60 feet by 60 feet.<\/p>\n

Now, back to gold as an investment.\u00a0 If you chose to invest in gold as a speculative investment and you understand the risk, your investment is no different than buying a stock. \u00a0Someone is right and someone is wrong\u2026either the buyer is right and is getting a good deal\u2026..or the seller is right and is getting out at the right time.\u00a0 That\u2019s the way the market works. \u00a0\u00a0Gold is an investment. It can go up and it can go down.\u00a0 It carries risk and is volatile.<\/p>\n

Again, the allure of gold comes from the idea that gold is a great protector during difficult financial times. In February of 2008, gold was priced at $973 an ounce.\u00a0 In July of 2011, gold was priced at over $1800 an ounce\u2026..that\u2019s practically doubling in value in 3 years. That\u2019s incredible!\u00a0 So, while our market and economy was moving into a decline, people came out of the woodwork to buy gold.\u00a0 This buying squeezed the supply and naturally forced prices up.\u00a0 Was this an artificial increase?\u00a0 No, the increase was truly tied to supply and demand, but the supply and demand was driven out of fear.\u00a0 The gold market has since corrected (down 30%) and who knows where it will go from here.<\/p>\n

The purpose of this info is not to change the minds of those who believe in gold as an investment, it is simply to educate those who don\u2019t understand gold as an investment.\u00a0 If you want to buy gold, you must first understand the risk of the investment\u2026.the same as any other investment in your portfolio.\u00a0 And, just like any other investment, investing without knowledge can be dangerous!<\/p>\n

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