Gold Investing

Gold is one of the most dynamic materials of the modern economy and some might find it humorous that the oldest form of valuing physical commodities is still thriving today. The first gold coins were produced in 700 BC and since then the metal has been used as the number one primary exchange element. The fact that gold is scarce and highly valued made it the perfect means of exchange, now matter what the exchanged items were. The history of gold turning into money covers a period of over 2600 years with the modern day turning point in the history of gold occurring in 1971.

How Did Gold Turn Into Paper?

Throughout history, gold and silver coins went through a process of debauching. Such coins began to be created out of gold and other metals, thus making the values of the actual coinage fluctuate in time. The process of turning physical gold into money began when goldsmiths, who used to store gold for other society members for a fee, started to issue receipts for their storage. The receipts idea spread quickly as it was much easier than carrying the actual metal, so people began to get used to the idea of paper money. Goldsmiths in time evolved into bankers and the currency evolutionary process continued to develop.

Why The Gold Window Closed?

The 15th of August 1971 is the day when the “Gold window” was closed by the American president Richard Nixon. From that moment on, paper money was no longer be convertible to gold, thereby removing the precious metal out of currency exchanges. In order to understand why the situation with gold in the economy reached this point, let’s go back in time to the moment when bankers saw the opportunity of replacing metal with paper money. Since they had the power of issuing the receipts for gold, bankers learned how to produce more receipts than the amount of gold they held. But, as you would expect, this practice also became popular and bankers soon started lending these receipts to the early governments and to the monarchs of the period.

New Acts And Mandates Regarding The Use Of Gold

England was the country where bankers created the world’s first central bank. The main purpose of such a bank was to lend money to monarchs, but it also served as protection for those bankers who issued more money than they could redeem in gold. However, it became obvious that this practice had a negative impact on the country’s economy. This lead to the apparition of the “Peel’s Bank Act”, which says that banks are not allowed to issue more paper money than the gold they actually had in reserves. Thus, the importance of gold as a decisive factor in the global economy remained high all throughout modern financial history.

What You Must Know About Modern Gold

An interesting evolution of gold prices began in 1934, when gold was priced at $ 20. In the period until 1971, the gold price remained around $35. However, with the changes that were happening in the global economy, gold prices reached $300 and they remained above or very near this threshold. Various factors in the geopolitical world had their influences on the evolution of modern gold prices.

Who Is Investing in Today’s Gold?

Today it’s easy to find the latest price of gold, from the Internet, the financial section in the morning paper, market news on TV, and even as a text message on your cell phone. But it wasn’t always like that. For decades the price of an ounce of gold was amazingly stagnant so investors didn’t see the value in following the price changes.

Today, the price gold has been changing, and a lot of interest has kindled for the precious metal. What once was under a hundred dollars in the 1940′s is now over $1,000 dollars. This has attracted investors in great numbers.

The price of gold is linked to how strong the US dollar is. Because of the great increase of gold over the last ten years, many investors believe it is a good time to buy and speculate. But remember that gold is a commodity, and doesn’t sit and earn interest like a bond in the bank. Your profit will be based on if the selling price is higher than the price you purchased it for, less any brokerage fees.

So when the price of gold goes up, you should be concerned about the value of the US dollar. This is because gold increases as the value of the dollar goes down. Since we are at the $1,000+ dollar per ounce levels, you can be sure the value of the US dollar is fairly low. This is indicates a lack of confidence.

Should you invest in gold today? We believe that with the proper resources and understanding only you can answer that question.