Gold is respected all over the world because of its rich history and value, and it has been interwoven into different cultures for hundreds, even thousands of years. Coins with gold appeared around 600 B.C. The first coin with pure gold was dug during the time of King Croesus of Lydia (or modern western Turkish provinces of Usak, inland Izmir and Manisa) 100 years later. Throughout centuries, civilizations have continued to use gold for many reasons.
Societies and economies have placed value on this precious metal, thus preserving its worth. This metal is the only thing society falls back on when other types of currency do not work. It means that it will always have some value as a safety net against difficult times. Listed below are some practical reasons people need to consider when owning this type of precious metal today. To find out more about this topic, read more about it on financial websites or journals for more info.
History of holding gold’s value
Unlike fiat money or paper currencies, coins, and other assets, this metal has maintained its value over time. Individuals see it as a way to pass on and preserve their money or wealth to their future children and grandchildren. Since time immemorial, societies and civilizations have valued their unique properties. It does not corrode and can be melted in the fire, making it very easy to work with and make into coins.
Not only that, it has a beautiful and distinctive color, unlike other metals or elements. Its atoms are heavier, and its electrons move a lot faster, absorbing some light in the process. The process took Albert Einstein’s theory of relativity actually to figure it out.
Weakness of the United States dollar
Although the United States dollar is one most significant reserve currencies in the world, when the value of this currency falls against other money as it did between the years 1998 and 2006 (or the Great Recession), it usually motivates individuals to flock to the safety of gold, which raises its prices.
This metal’s price nearly tripled during these times, reaching the $1,000 per ounce milestone in 2008 and doubling between years 2008 and 2012, hitting over $2,000. The decline of the U.S dollar happened for many reasons, including the significant increase in money supplies, the country’s trade deficits, and a large budget.
To know more about the Great Recession, visit https://www.history.com/topics/21st-century/recession for more details.
Inflation safety net
This precious metal has traditionally been in a good safety net against inflation because the price tends to increase when the cost of living rises. Over the past 60 years, people have seen its price soar and stock markets all over the world to dive down during high-inflation times.
It is because when paper money loses its purchasing power to inflation, this element tends to be priced in these currency units and tends to increase along with other prices. Not only that, it is seen as an excellent store value, so a person may be encouraged to purchase this element when they believe that currencies in their country are losing their value.
Protection from deflation
Deflation is a period in which the price of commodities decreases when businesses slow down, and the economy is hampered by excessive debt. It has not been seen on a worldwide scale since the Great Depression in the late 20s and the entire 30s. It happened to a small degree during the 2008 financial crisis or the real estate bubble in some parts of the world.
During the Great Depression, this element’s purchasing power soared while prices of other commodities dropped dramatically. It is because individuals chose to hoard fiat money, and the safest place to hold money was in the form of gold like bars and coins at that time.
The bottom line
This element needs to be a significant part of a diversified investment portfolio since its price rises in response to various events that cause the value of other investments like bonds and stocks to drop. Although its price can be uncertain in the short term, gold has always maintained its importance in the long run. Through many years, it has served as safety nets against deflation, inflation, as well as the erosion of major currencies like the United States dollars; thus it is an investment that people need to consider.