Gold is sometimes described as the ‘royal metal’ and it is a commonplace to observe the special place it holds in our imaginations. The first currencies that we know of were made from gold, throughout written history it has been a symbol and indicator of wealth and until less than a hundred years ago it underpinned the world’s great currencies. Even now, in our modern age, the perfect, incorruptible metal has its many adherents; gold is still seen as a wealth preserver and maintainer and it is no coincidence that when turmoil political or economic threatens then there is a rush on gold. Does this make it worthwhile to invest in gold shares? We should, of course, distinguish between buying shares in a gold mining company and buying the bullion itself. Of course, there are many ways in which you can invest in gold shares now, in one form or another; you can invest in gold futures if you want to use leverage to benefit from rising gold prices; you can invest in gold mutual funds and gold ETFs. You might also be inclined to simply use gold as a form of diversification in your portfolio. Whether you are using gold to hedge against inflation and the declining value of the pound/dollar/euro, or to preserve your money because you fear catastrophe or you simply think that there is a profit to be made from the annual fluctuations in the gold price, there seem to still be many uses for the metal. For this reason, it probably still is worth investing in gold.
This recommendation comes with all of the usual provisos attached; investing in gold shares should be a sensible, considered decision on which you have given much thought. You might have various reasons to want to invest in gold shares. You might be aware of a new opportunity for exploitation somewhere and wish to be in on the ground floor of this development; you might, from your readings of the markets and the economy in general, predict one of the periodic panics that rip through the financial world at regular intervals and decide to take advantage of the ensuing gold rush; whatever your reason, you should approach gold as you would any other investment and not be caught up in the mystique that has grown around this particular precious metal. Neither should you go too far in the opposite direction and scorn gold. It may be true, as Warren Buffet among others have pointed out, that many tech shares have offered greater profits over the last few years. It might also be true that there is something antiquated in our reverence for gold, just because of what it is and what it has always represented for us. However, remember that over 2016 the price of gold rose from US$1,078 to US$1,177, which represented a rise of 8% over the year. Is it worth investing in gold stock and shares anymore? It would have been in 2016.
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