Four Main Characteristics of Gold that You Should Know – Introduction
Gold has been a fascinating metal in the past centuries. In the past, the metal was the primary means of exchange. A quick look at ancient manuscripts show how the metal has continued to play an important role in people’s lives. Today, gold has lost its luster. It has no major industrial uses and it has also been overtaken by palladium to become the second most valuable metal in the world. This article four most important characteristics of gold that you should always remember.
Gold is Money
Most of the gold that is mined every year ends up in vaults managed by central banks and investment companies. Gold is defined as money because of its three most important characteristics of money which are: medium of exchange, store of value, and unit of account. If something meets three of these qualities, then it can be defined as money. To a large extent, gold meets this characteristic because it is used as a means of exchange, it is store of value, and it has a unit of account. If it was none of that, why then would global central banks hoard it?
Gold is insurance
Most investors who hold gold do so to caution themselves from major disasters. They believe that the value of gold will rise when there is a major occurrence such as an apocalypse. Indeed, it is common for the price of gold to move up when there are major uncertainties. For example, in the 2008/2009 crisis when stocks tanked, the price of gold moved lower by a small margin. In addition, when the amount of volatility in the market rises, gold tends to rise because investors view it as a safe haven.
Gold is constant
As a metal, gold will never change. In fact, its qualities such as its ability to avoid corrosion are the special qualities that make it loved by investors. Therefore, if you own an ounce of gold today, you will still have it in the next five years. It will still be an ounce of gold. However, at the same time, the value of the gold will have changed. This will not be gold’s problem but that of the dollar. Better, the amount of gold being discovered has been declining. Therefore, as the demand rises and supply dwindles, the price could continue to rise.
Gold is Resilient
Unlike other commodities, gold price has remained resilient in the past 40 years and its value has remained valuable for centuries. In 1970, president Richard Nixon removed the gold standard. The standard had fixed the US dollar to the value of gold. This decision led the price of gold to move from $35 to more than $100. Over the years, the price of gold has continued to rise and is currently trading at more than $1300. This resilience has not happened in other commodities like crude oil that have seen their prices decline to almost zero.
As a trader, there are three main ways in which you can trade gold. First, you can buy physical gold and store it and wait for the price to rise. Second, you can buy stocks of companies that mine gold. Some of these companies are Newmont and Goldcorp. Third, you can trade gold futures that are listed in companies like DTTW.