Gold is the most popular precious metal used as an investment. Throughout history gold has been used as money. In 2006, it was estimated that over 158,000 tons of gold was mined in total. Like most commodities, the price of gold is dependent upon speculation as well as supply and demand.
The International Monetary Fund and Central Banks play a very important role in the price of gold. About 19 percent of above ground gold was held in official organizations and central banks toward the end of 2004. In 2006, China held about 1.3 percent of its reserves in gold. Other countries such as India and Russia have expressed interest in purchasing a growing their gold reserves realizing the value of investing in gold.
Interestingly, interest rates and the price of gold are closely linked. Whenever interest rates have tended to rise, the price of gold has tended to fall and as interest rates have fallen, the price of gold has tended to rise. Over two-thirds of the gold is found in jewelry. About 12 percent of gold is used in the medical, dental and industrial fields.
Recently, recycled and second-hand jewelry has become a multi-billion dollar industry. Companies like “Cash for Gold” have made turning gold into money an immediate investment that is convenient and accessible. These companies are known for offering fair prices in exchange for unwanted gold jewelry. However, it is important to keep in mind some companies have not offered fair prices, so be careful when or if you decide to exchange any of your gold jewelry for cash.
Gold Bullion, Coins and Certificates
Traditionally the most common way of investing in gold has been purchasing bullion gold bars. Bars can be purchased in a variety of sizes. As bars become larger in size it is good to know that they carry a higher risk of forgery. Bars within the London bullion market system can be purchased and sold easily because they have a verifiable chain of custody.
Bullion coins are easier to confirm legitimacy. They are a very common way of investing or owning gold. The Krugerrand is the most popular type of gold coin. Some other common gold coins are the Canadian Gold Maple Leaf, the Australian Gold Nugget and the American Gold Eagle.
Investing in a gold IRA is another way to invest in gold without the same risks and costs associated with storing physical bullion. In the 17th century the first paper bank notes were gold certificates. The first authorized use of gold certificates in the United States was in 1863.
Why invest in gold?
There are many reasons why people choose to invest in gold versus other forms of investment. Gold, unlike paper currency or other means has continued to hold its value over time. Over time, the demand for gold has increased and continues to increase. Many people see gold as a way to preserve and pass their wealth from generation to generation.