Since gold does not entail credit or counterparty risks, it serves as a source of trust in a country and in all economic environments, making it one of the most important reserve assets in the world, along with government bonds. Some people argue that gold has no intrinsic value, that it is a barbaric relic that no longer possesses the monetary qualities of the past. They argue that in a modern economic environment, paper money is the preferred currency; that gold is only good as a material for making jewelry. From a fundamental perspective, gold is generally considered to be a favorable hedge against inflation.
Gold works as a good store of value against a declining currency. The only thing that truly gives value to gold is the fact that almost every country has its own sovereign possession of gold. In fact, the United States currently has around 4,500 metric tons of gold in its reserves. Gold is essentially used to back up a currency.
In the past, coins could be exchanged for gold. In the United States, this is no longer the case. However, the country still has an enormous amount of gold as a backup reserve. The minting of coins or the manufacture of metallic money marked the advent of the notion of standardized economic value.
Commodity or metal coins were manufactured all over the world around 700 BC. C. Previous economies were based on bartering and trade. The coins allowed merchants to assign a standardized value to the merchandise they bought and sold.
Gold alloy coins were minted and distributed for the first time around 550 BC. by King Croesus of Lydia, in a region that is now part of modern Turkey. These coins were circulating in neighboring countries. Gold's reputation for preserving its value brought it to the top of the list as the metal of choice for minting coins across Europe.
Simultaneously, other economies grew around silver. The international trading system was replaced by a more flexible one, but gold as an investment has remained popular as a safe haven, and central banks still hold large amounts of their wealth in ingots. The amount of gold ingots a country had determined the amount of national currency that the country could put into circulation. The easiest way to expose yourself to gold is through the stock market, through which you can invest in real gold ingots or in the shares of gold mining companies.
A piece of gold may have no immediate physical value to the person holding it; you cannot eat or drink it, for example. Therefore, part of the reason that gold has always had value lies in the psychology and nature of human experience. 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. Initially coveted for its malleability and resistance, gold has occupied a prominent place in the development and stabilization of the international economy and world currency markets.
We will look at the use of gold as a long-term component of a diversified portfolio and as a short-term intraday trading asset. For purists, owning gold is about having security and certainty, and not all of the above allows for it. The goldsmiths realized that it was rare for a customer to ask for their gold returned; few people exchanged real gold, which favored the portability of receipts. Although silver can be polished and textured in multiple ways to capture light and attention, there is no metal left like gold.
Silver and gold are beautiful metals that are easy to turn into jewelry, and both precious metals have their own devotees in fine jewelry circles. From an elementary perspective, gold is the most logical option as a medium of exchange for goods and services. We'll look at the basics of gold trading and what types of securities or instruments are commonly used to increase exposure to gold investments. .