The role of gold in socio-economic development In addition to direct and indirect jobs, gold mining also provides foreign direct investment and tax revenues to countries. Gold mining companies, which often operate in remote locations, invest in infrastructure and utilities. From a fundamental perspective, gold is generally considered a favorable hedge against inflation. Gold works as a good store of value against a declining currency.
The value of gold derives from its scarcity as a commodity, as well as from its long history as a stable medium of exchange. The price of gold tends to rise during economic uncertainty and when inflation is high. The importance of gold is also reflected in the recycling and export industries, to name just a few. After addressing some of the supply-side and employment-side effects, the last two graphs address the demand side of the gold equation.
The most common way to invest in physical gold is through the SPDR Gold Shares (GLD) exchange-traded fund (ETF), which simply holds gold. The goldsmiths realized that it was rare for a customer to ask for their gold to be returned; few people exchanged real gold, which favored the portability of receipts. A recent report by Price Waterhouse Coopers and the World Gold Council details their global view of the importance of gold in the world economy. Previously, those with large gold reserves stored it in government mints until King Charles I once seized all the private gold stored in the Royal Mint, weakening consumer confidence and bringing customers into the arms of private goldsmithery banks.
Before we jump on the gold bandwagon, let's first stop the enthusiasm about gold and, first, let's examine some reasons why investing in gold has some fundamental problems. Passive investors who want great exposure to gold miners can consider the VanEck Vectors Gold Miners (GDX) ETF, which includes investments in major mining companies. The technical development of a device called a touchstone allowed people to quickly assess the amount of gold within a particular alloy and assign a value to the metal precisely based on its percentage composition of gold. The first is the VanEck Vectors Gold Miners ETF, known as GDX, a security that tracks the overall performance of gold mining companies.
The easiest way to expose yourself to gold is through the stock market, through which you can invest in real gold bars or in the shares of gold mining companies. Private traders bailed out banks with their personal stores, and the government imposed regulations requiring banks to exchange gold at a fixed and determined rate, giving rise to the gold standard. In general, gold matters and, judging by the behavior of the price of gold during the first 13 years of the 21st century, that importance is likely to increase relative to many (probably the vast majority) of other competing asset classes. The national currency could be exchanged not only for gold but also for the national currencies of other countries; national currencies and paper circulated along with gold coins.
The gold mining industry seems like a very volatile way of maintaining what is supposedly a non-volatile investment; likewise, ETFs that focus on gold mining share the unpredictability that accompanies that industry.