When it comes to financial assets and investing, there is perhaps no precious metal more sought-after (generally and historically speaking) than gold. Possessing unique characteristics as an element which makes it extremely ductile and malleable, gold is useful on a variety of fronts. It’s also worth noting that it’s conductive, which means that it can also be used in specialized electronics or various types of engineering. In short, there are plenty of really good reasons to own this particular metal, both in terms of short and potential long-term gains.
For most people, the drive to purchase gold is based more on the principles of maintaining “purchasing power”. In other words, as national currencies continue to dwindle in overall value due to the effect of inflation (i.e. – increasing volume of supply through enhanced money printing), wary investors see gold as something of a safe haven. The logic here is fairly straightforward – you want to transfer or convert your capital over into something that helps to maintain an actual long-term value, rather than an adjusted value (in the short-term).
This is not to say that gold prices won’t often fluctuate, because even this relatively safe-looking asset has had its own ups and downs. However, if you look at historical figures you’ll notice right away that these periods of upheaval are far and few between, as they say, tending to occur in much longer cycles than bubbles in other asset classes. In other words, this simple fact tends to cause potential investors to perceive of gold as more of a means of protecting certain gains as opposed to outwardly “investing” them as a means of increasing your overall holdings.
Conversely, there are individuals who are decidedly bent on short-term gold trading, seeing it as a fairly easy way for someone with access to significant sums to turn regular, hefty profits from buying and selling the dips. Naturally, doing such a thing is much trickier and perhaps dangerous than it sounds, with only the most astute and vigilant reaping the sort of standardized profits from short-term gold trading. More often than not, it is companies that specialize in actually purchasing and selling gold at certain “over the spot” prices which tend to be more successful in these types of ventures.
For the average investor, simply buying and holding gold on a personal basis for simple trading and hedging purposes should be more than sufficient. However, there is also the option of exploring Gold ETF’s (or Gold Exchange Traded Funds) which seek to track the price of gold via complex algorithms (aka – “derivatives”). This is an area where the more mathematically-minded person might flourish, perhaps even providing them with a greater understanding of price fluctuations in gold prices. Needless to say, if one were to combine both approaches (physically holding gold as well as hedging via Gold ETF’s) it might be possible to adopt a more beneficial “hybrid” investing strategy.