Precious Metals
One of the first
lessons an investor learns is to diversify his investments. By mixing a variety
of different assets he can minimizes the impact of any single group of
securities on the overall performance.
This is a risk management technique that works well. Precious metals investing
may be an important part of the diversification process and should be
considered but their performance must be carefully monitored. Precious metals
have generally increased in value over time and can add a high degree of
stability to investment performance since any changes in value are usually very
moderate and they are practically unaffected by the high number of variables
that can have a major impact on other types of investments (read more about safest investments).
Investing in the most valued precious metal…gold.
Gold
has been valued as a worldwide currency, a commodity, an investment and because
of its sheer beauty for thousands of years. With the rapid development of
financial markets during the late 1900’s gold became of less interest to most
investors. Recently there has been a noticable increase in investor interest in
gold probably due to a long term escalation of its price. The demand for gold
worldwide has always been higher than the limited supply adding greatly to its
value and is a positive factor in the renewed interest along with its appeal
and new industrial uses..
From the first discoveries of gold in ancient times, its beauty and the ease
with which it could be worked have inspired craftsmen to use it to create
ornaments. The first pure gold coins were struck by King Croesus of Lydia (present-day Turkey) during his reign between
560 and 547 BC and gold coins have continued as legal tender since that time.
The Egyptians mined gold before 2000 BC and the first coin containing gold was
struck in the eighth century BC.
The best
estimates available suggest that the total volume of gold mined over history is
approximately 158,000 tons, of which more than half has been mined since 1950.
Production has been on a downward trend since 2001, due to reduced exploration
and production caused by the low gold price of the late 1990s and the small
number of major new gold discoveries. Analysts believe mine output will remain
relatively flat for the next few years keeping the supply low and the price
increases of the recent past continuing because of no let up in demand.
Throughout
human history, gold has been not only a means of exchange, but also a store of
value. Gold is an excellent hedge against inflation, and protects earnings for
the future. Investors can invest in gold
by purchasing gold bullion in the form of bars or coins or they can trade
in gold or gold futures electronically or by investing in gold mining or
refining companies.
There
are actually many ways to invest in gold to take advantage of its bullish
fundamental situation. You could buy gold itself, buy gold stocks, or buy gold
derivatives. Just as in any other sector, there are abundant gold investment
possibilities out there to meet the unique risk tolerance and capital
deployment of any potential gold investor.
Before
you invest in gold, you should carefully consider what percentage of your
overall portfolio you wish to risk in gold-related investments.
The
reasons for investing in gold have remained much the same throughout history.
Gold is a safe haven in times of economic and financial instability. It is a
proven asset-diversifier that, when included in domestic portfolios, reduces
the portfolio's overall risk. And gold is an excellent hedge against inflation
over the long term. Gold is the only asset that is negatively correlated
against the price of the dollar.
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