So now we will look at 5 indicators why Gold is still a “go to” play in today’s investment climate.
* Government debt defaults will affect currency valuations
A weak currency means it has low value of course, and as currency falls, gold rises as an alternative form of barter. As we know, not only private individuals are in debt, so are local councils and whole governments, right up to the US. With the increasing threat that governments cannot pay their debts, currencies Investment climate weaken, and gold will rise.
* Record returns from some gold funds
From a more positive investment point of view, Business Today Online reported an Exchange Traded Fund for gold in India had reported record monthly rises of 15% in August 2011. This suggests that Gold is still on the increase!
* Increasing demand for gold from China & India.
The same article also provides some evidence of the increase in demand from India and China, which is a long-term fundamental with their growing populations coupled with increased prosperity. Looking at the jewellery market, demand grew in India by 38% and in China by 25% year-on-year, which is a solid indicator for us that demand for gold at least is still likely to be on the up.
* Many new companies created who want your gold show demand is strong.
It is interesting how many companies have been created who wish to buy your gold. In volatile times, along with heavy debts, it may seem a good idea, if not a desperate need, to sell your family jewels for cash. However, in the long term, you may be losing out again. It may be wiser to embark on a debt repayment scheme and negotiate the debt down with providers than sell assets that are actually rising in value over the medium to long term.
* Assets perform in a volatile market
This point may be a summary of sorts, but in a time when currency may become worthless, or a change of currency happens globally as the solution, owning “things” like land, like gold and silver means you have a bartering tool when all else has failed. History is littered with inflationary disasters, and gold has always been one of the ‘must have’ investments.
So there we are, my current thoughts on the situation. Factors economically do not suggest that a significant recovery is going to be underway for some time. So whilst that is the case, gold remains a solid option for any portfolio. Hopefully, as an investor, you will feel more informed to make future decisions in this sector.
Chris James Davidson has worked in the investment industry since 2002, renovating properties, sourcing capital city buy to lets, creating alternative investments and finding alternative funding for businesses.