Gold bullion may well be the perfect investment at the moment. Demand for gold far outstrips supply and the way things are looking, it’s going to continue that way for a long time to come. Acquiring gold bars is the perfect way to hedge against the uncertainty of the future and to bulletproof your portfolio.
The value of any unit of wealth depends on the confidence people have in it. Unlike many paper currencies, people’s confidence in gold is high and set to increase which makes it the ideal asset to acquire and hold.
Meanwhile the supply of gold is limited and the cost of extraction is getting higher. No new cheap supplies are likely to appear anytime soon.
To better understand the world gold situation, let’s look at the world demand for gold and see who relies on the yellow metal.
The fact is that gold is not just a valuable metal to be bought and kept in vaults or crafted into jewelry. Its special properties make it a key component in many medical and technological processes and systems. Its growing importance in the latter means a continuing demand for the future.
Firstly, we’ll look at gold kept for investment purposes. Gold’s beauty and scarcity have long made it the perfect medium of exchange. Gold is the best metal for this purpose because of its high value, durability, portability and easy divisibility.
When paper money was first introduced it was backed with gold. In fact until the early 1970s, the United States was on the ‘gold standard’ and promised to exchange gold for dollars at a fixed rate. Many people blame the world’s current economic woes on the ending of this system. Nonetheless, gold remains a major asset for most of the world’s governments.
Thus gold bullion is a key component of the assets of all the world’s major central banks. What’s interesting is that the state banks of the newly emerging super economies – India and China – having been adding to their stock of the yellow metal recently.
Other than central banks, investment and commercial banks also hold large supplies of gold both as their own assets and on behalf of clients.
Another use for gold is in the creation of gold coins. Issued in specific weights, these are popular ways for people to buy and hold small volumes of gold for investment. Gold coins are also issued for commemorative purposes. This gives the item both a collectable value and an asset value for gold itself.
Gold’s malleability, tarnish resistance and ductile qualities, together with its beauty and luster have long made it the metal of choice for the crafting of the finest jewelry and this is something that will only continue despite the popularity of platinum. After all, what would a wedding be without a gold ring?
Gold is an important material for use in medicine. The use of gold fillings, permanent bridges and crowns in dentistry is long established but nowadays, gold is used for an array of essential medical instruments, particularly in the use of lasers and medical electronics.
Industrially, the main use for gold is in electronics. This is because it’s such an efficient conductor of electricity and resistant to corrosion and tarnishing. Gold is perfect for use in connectors, switch and relay contacts, soldered joints, connecting wires and connection strips.
Other key industrial uses include computers and catalytic converters. Gold is needed to build everything from aircraft to space craft and cars.
The fact is that gold has so many uses, there will always be demand for it. Most of the uses of gold today have only been developed in the last few decades suggesting that many more uses are on the way in line with technological progress. Meanwhile, according to estimates made in 2005, the cost of extracting one ounce of gold stood at over $400.
When looking to acquire gold for investment rather than sentimental reasons, you should buy gold bars and gold bullion.