Why Invest in Gold?
Gold Standard
The role of gold in the world today is the outgrowth of the world's currency experience since the beginning of the 20th century. It will be appraised here by reviewing the evolution of the traditional gold standard, the process of gold monetization in national monetary systems, the continuing use of gold as an international reserve asset, and the creation, in 1969, of a new "international monetary facility," summarily baptized "paper gold," in the guise of special drawing rights (SDR's) that it is hoped will grow into the principal international reserve asset.
Traditional Gold Standard
The gold standard was a late development in the evolution of money. Gold coins, it is true, were used in the ancient world, in the Byzantine Empire during the Middle Ages, and in the Italian mercantile cities on the eve of modern times. But silver, not gold was the standard of value and the principal means of payments. In 1821, Britain became the first country to use gold as the standard. Other countries gradually turned to the gold standard beginning in the 1870s, but only during the years from the mid-1890s to 1914 did it prevail through most of the world.
The principal steps in the rise of the gold standard were the decline of bimetallism, as a result of which silver ceased to be the monetary standard and unlimited legal tender; the use of paper currencies circulating alongside gold coins, but backed by and convertible into gold; the widespread appearance of deposit banking, with gold reserves setting the limit on the volume of deposit currency; and the rise of central banking.
Meaning of the pre-1914 Gold Standard
As understood in its heyday, the gold standard meant that 1) the basic monetary unit was defined in terms of a fixed quantity of gold; 2) provision was made for free and unlimited coinage of gold (hence the term "gold coin or specie standard"); 3) the currency was freely redeemable in gold or in claims in another currency that was itself convertible into gold (this variant was called the gold-exchange standard); 4) gold could be freely exported and imported.; and Fulfillment of these conditions ensured that the exchange rates did not move outside narrow limits called the gold points, which were determined by the cost of shipping gold from one country to another. These arrangements came near to providing a single worldwide currency system.
Only a few countries were forced to abandon the gold standard after adoption, and devaluations of gold currencies were most unusual. The international monetary stability that prevailed was accomplished without trade or exchange restrictions or quotas of the type widely introduced subsequently in the 20th century. More remarkable, perhaps, is the fact that many countries functioned under the international gold standard with a bare minimum of reserves and only occasional international cooperation on matters of monetary policy. For example, the ratio of gold reserves to the total demand liabilities of England's banking system was less than 5% during the immediate pre-World War I period.
Exchange stability was accomplished largely because of the dominant nature of a single monetary policy objective: the maintenance of fixed exchange rates against other gold currencies. Losses of gold or other legal reserves by the central bank were a clear signal to take corrective action, such as raising the discount rate. The notion that central banking policy should serve to stabilize economic activity and prices and provide for orderly economic growth was basically unknown at the time and thus was not a policy objective.
Gold Demonetization in National Monetary Systems
Central banks no longer issue gold coins at a fixed statutory price in exchange for bank notes, as they did prior to 1914 in most countries and prior to 1933 in the United States. Nor do they redeem their note and deposit liabilities in gold bullion, as in the mid-1920s.
Some nations, such as Ireland, restrict dealings in gold bullion by residents. No dealings in bullion take place in Ireland, and residents are required to have specific authorization to purchase gold coin or bullion outside the country. In most countries, residents are free to buy, sell, or hold gold coin, although taxes may be levied on buying and selling transactions. Until late 1980, residents of the United Kingdom were restricted in their gold dealings, despite the presence in London of one of the world's principal gold markets.
The decade of the 1970s was one of gradual easing of restrictions on holding and trading gold throughout the world. Most countries now allow domestic holding of gold in all forms and permit free gold markets. The current status of regulations in each country of the world is reported annually by the International Monetary Fund (IMF) in the organization's Annual Report on Exchange Arrangements and Exchange Restrictions.
Why Invest?
By investing in gold and gold coins, you can gain in many ways. It is not without reasons, after working for years to say - golden deal!
Is it now a good time to buy the gold? In the case of gold the answer is always the same - yes. And why?
- is stable
Despite possible price fluctuations on the open market value of gold remains constant. Investing in gold is the guarantor of a stable transaction. It is this characteristic of gold, which distinguishes it from the available forms of investment, and it equally convinces financiers and sophisticated global investors too. - is safe
Around the world, gold is considered to be the safest bet and is valued for excellent protection against stock market's financial meltdown, inflation, currency fluctuations, especially in troubled times. Even the turbulence in the economic market, does not affect the value of gold, and keep its price high. - is independent
Security, which provides the gold is related to its independence from state governments, currencies, credit. Tensions in the stock market affect the position of the U.S. dollar as it gets strengthened and hence there is increase in the price of gold as well. - smooth around the world
Gold is interchangeable throughout the world for 24 hours a day. You can have an international currency with gold, which you can always cash, anywhere in the world, anytime. It is smooth financially - recognized and accepted as a form of payment, which allows you to easily buy, sell and exchange worldwide. - is the capital of assurance
Gold is the best insurance policy of your assets - gold prices rise independently of stocks and bonds. Often increase when stock prices are falling. Gold can be considered as capital, standing on guard against unexpected trade shares and the majority of technical failures on the stock exchanges. This is why many experts urge investors to hold part of their capital in gold. Just in case - for a rainy day. In this way, you can protect your savings, and always look to the future calmly. - is the investment for uncertain times
Gold is the only real value of saving lives during wars and allowing financial survival during economic crises. Gold market analysts, and all those who have come to this metal, call it the investment of the uncertain times. And since the use of such words, it means that we live in very uncertain times, because the gold price climbs. - is indestructible
Easy to store and far more robust than paper money. Central banks hold gold in their vaults rather than banknotes. Flood, fire or other disaster only gold endures all things. Not destroyed in case of fire or flood as opposed to bank notes and securities. - can not be copied
Gold can not be fabricated - the weight and purity of gold and gold coins is precisely controlled and standardized by international oil companies and official government mining. - is the repository of values
The value of gold increases steadily with the increasing demand for this precious metal. Gold is a great way to pass from generation to generation family estate - because it is transnational and timeless.
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