Gold Continues To Reign

Despite the arguments for and against gold as an economic indicator, this precious metal continues to hold a prominent position in our society and in our financial world.

Gold is a very unique substance and is one of the few items that can retain its economic value in recessions and even depressions.  Gold acts as a reference point for many international currencies. It is universal in that affords the same value to currency markets all over the world, providing a stable and unifying strength to global economies.

Gold better than dollars

Some financial analysts suggest that gold would make a much better currency than the paper dollar that we use today. Here are the reasons they give:

Gold always retains its value no matter in what state the local economy finds itself or how inflated the paper dollar is. Gold cannot be produced easily. It is drawn from mines and this takes time and energy. Gold’s inherent stability protects society from being overrun by power seekers of all kinds. Unlike the paper dollar, gold is not printed and therefore the currency cannot get inflated by man’s greed. The paper dollar, printed in the United States by the Federal Reserve, regulates the economy by adjusting interest rates, handling the money supply, and essentially managing inflation. The difficulty with a system controlled by man is that humans are inherently avaricious and cannot be depended upon to always effectively monitor the economy.

According to the pundits, if gold replaced printed currency, wars would become far less common. When a nation goes to war, the currency of that country becomes inflated and money is printed in order to accommodate the war effort. The influx of additional currency is a more efficient move for a government than imposing higher taxes across the board because inflation in the extra currency is not noticed and it allows governments to spend more money on the nation’s military requirements. Wars can be conducted with only minor economic problems imposed on its citizenship.

Gold is a desirable item and people consider it a valuable commodity. People want it and they are willing to spend money to purchase it. This makes it appreciated and investors are eager to trade it for other assets. In fact, prudent traders always have some gold in their investment portfolio as a means of diversifying their holdings. Unlike many other investment instruments, gold is tangible. It can be touched and held in your hand. Gold is valuable to all countries and almost all central banks buy and hold gold in reserve for times of need. 

Gold Futures

Because gold prices generally move in the same direction as inflation, gold futures are held as hedging tools for businesses. Gold futures also provide opportunities to act as an alternative to investments in coins, gold bullion, and mining stocks. Many investors continue to view gold as a safe haven because it has more or less maintained its value during economic and political events, while continuing to offer ongoing trading opportunities. Trying to forecast gold prices is a challenging assignment.

Fluctuating gold prices affect world currencies and significantly impact the currencies of major gold-producing countries such as Australia, Canada, and South Africa. A currency trader who trusts the price of gold will increase, can trade in the Australian dollar (AUD), the Canadian dollar (CAD) or the South African Rand (ZAR) instead of investing only in the US dollar, because these other currencies maintain considerable potential. 

Gold trades on several financial exchanges, primarily the Hong Kong, New York, Sydney, Tokyo, and Zurich exchanges. The London bullion market, however, has a greatest influence on the world gold trading markets. The price of gold changes is constantly fluctuating but is generally fixed twice each business day at 10:30 am and 3:00 pm UK time by the London Gold Market Fixing Ltd.