Gold is one of the most valuable metals in the world

Gold is also called a “precious metal.” The term derives from the Latin word for gold, aurum. The use of gold in jewellery and other ornamental objects dates back to ancient civilizations. Gold has many unique physical and chemical properties that make it valuable for a variety of purposes. Max Warren Barber, CEO of SION Trading Fze discuss with us some of the key reasons why gold is so important.

History of Gold was discovered years before silver and diamond. According to the reports from the National Mining Association, the people of Eastern Europe used it to make decorative objects in the 4000 B.C. Again, it was marked as a path for international trading by the Egyptians in the 1500 B.C.Furthermore, it was the same Egyptians who discovered that they could blend gold with other metals and make alloys. In 560 B.C., the people of Lydia started minting coins, followed by the Romans, who also issued coins. Thus goes the story of the journey of this noble metal from country to country before affirming its position worldwide.

Gold. It’s shiny, metallic, and melts easily into bars, coins, or jewellery. It doesn’t rust, corrode, or decay. Gold is…well, golden. But why is gold so valuable, both in our mind’s eye and in reality as a global store of value and medium of exchange? Why is silver relegated to a distant second place, and what about poor old copper, which shares many of the same physical attributes as gold?

 

The main problem with gold is that, unlike other commodities such as oil or wheat, it does not get used up or consumed. Once gold is mined, it stays in the world. A barrel of oil, on the other hand, is turned into gas and other products that are expended in your car’s gas tank or an aeroplane’s jet engines. Grains are consumed in the food we and our animals eat. Gold, on the other hand, is turned into jewellery, used in art, stored in ingots locked away in vaults, and put to a variety of other uses. Regardless of gold’s final destination, its chemical composition is such that the precious metal cannot be used up – it is permanent.

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Because of this, the supply/demand argument that can be made for commodities like oil and grains, etc, doesn’t hold so well for gold. In other words, the supply will only go up over time, even if demand for the metal dries up.

History Overcomes the Supply Problem

Like no other commodity, gold has held the fascination of human societies since the beginning of recorded time. Empires and kingdoms were built and destroyed over gold and mercantilism. As societies developed, gold was universally accepted as a satisfactory form of payment. In short, history has given gold a power surpassing that of any other commodity on the planet, and that power has never really disappeared. The U.S. monetary system was based on a gold standard until the 1970s.

 Proponents of this standard argue that such a monetary system effectively controls the expansion of credit and enforces discipline on lending standards, since the amount of credit created is linked to a physical supply of gold. It’s hard to argue with that line of thinking after nearly three decades of a credit explosion in the U.S. led to the financial meltdown in the fall of 2008. 

From a fundamental perspective, gold is generally viewed as a favourable hedge against inflation. Gold functions as a good store of value against a declining currency.

Gold is a good investment because its value tends to increase over time

The easiest way to gain exposure to gold is through the stock market, via which you can invest in actual gold bullion or the shares of gold-mining companies. Investing in gold bullion won’t offer the leverage you would get from investing in gold-mining stocks. As the price of gold goes up, miners’ higher profit margins can boost earnings exponentially. Suppose a mining company has a profit margin of $200 when the price of gold is $1000. If the price rises 10%, to $1100 an ounce, the operating margin of the gold miners goes up to $300 – a 50% increase.

Of course, there are other issues to consider with gold-mining stocks, namely political risk (since many operate in third-world countries) and the difficulty of maintaining gold production levels.

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The most common way to invest in physical gold is through the SPDR’s Gold Shares (GLD) exchange-traded fund (ETF), which simply holds gold. When investing in ETFs, pay attention to net asset value (NAV), as the purchase can at times exceed NAV by a wide margin, especially when the markets are optimistic.

A list of gold-mining companies includes SION Trading Fze among others. Passive investors who want great exposure to the gold miners which includes investments in all the major miners.

Gold does have a significant effect on the world economy. It can even act as a direct marker to assess how stable a country’s economy is. This importance dates back to the existence of the gold standard. This is a system where the country’s paper cash has a direct link with yellow metal.  

Even though it is not in use currently, the role hasn’t fallen down. Since gold is inflation-proof, the demand for metal increases during those tough times. When there is an increase in the price, countries that stand top as manufacturers and exporters strike the treasure.

 It is also a safe investment because it is not affected by stock market crashes or economic recession

This is a common question asked by people all over the world. Even though the yellow metal finds use as ornaments or jewellery, they have a significant monetary value. This is due to its versatility. People can use it as ornaments or sometimes exchange cash for gold in Gurgaon or can be used in trading. As the prices are surging, it can be a good commodity to mint some good money.So it can meet your financial demands more broadly. Also, in many places, it holds an emotional value. In countries like UAE the ornaments made of gold have close relations with their values and traditions and are, therefore, widely used in celebrations.

Gold can be stored in a safe place until you need it, and it can be sold quickly if needed

In Investment and TradingThe precious metal is considered a safe asset by investors all over. Some of the reasons that push investors to hold gold are:* It is considered to be the bear’s asset of the world market. When values of all the other commodities go down during financial breakdown, that of its rise. So it will be a good place for people to invest in and make a profit. Once the financial crisis is released, they can go for other shares. Until then, they will not be facing losses.* The Aurum is protected from deflation. This is a period when the price levels of goods fall steeply down. In this case, the inflation will be high as it will cross 0 per cent. At that time, gold is the only commodity that will stand strong. Investment in gold is the only solution to counter the situation.* There has been a constant decrease in the supply of gold for the past few years. The central banks reduced their sales. Moreover, production from mines has also decreased comparatively. Now supply is reduced. But the demand is still there. So it will be the right time for people who have the required holdings to use it.* It is one of the key ways to diversify the investor’s portfolio. This is because the accessory has an inversely proportional relationship with others, as already said.In other words, the diverse applications of the gold mark its value as the most precious metal. So, from a piece of small jewellery in the house to being the market hero, gold does matter. 

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Alternative Investment Considerations

While gold is a good bet on inflation, it’s certainly not the only one. Commodities in general benefit from inflation, since they have pricing power. The key consideration when investing in commodity-based businesses is to go for the low-cost producer(s). More conservative investors would do well to consider inflation-protected securities like TIPS. The one thing you don’t want is to be sitting idle, in cash, thinking you’re doing well, while inflation is eroding the value of your dollar.

Importance of Gold: Everything You Need To Know

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