People are literally trying to find more gold as its price keeps rising. Analyse why Demand for Gold continues to rise in-light of economic uncertainty and risks of inflation. You might also explain some of the history of the commodity as a standard for valuing currency, etc.
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Gold has been known and highly valued since prehistoric times and throughout history.Of all the precious metals, gold is the most popular as an investment. Investors generally buy gold as a hedge or safe haven against any economic, political, social, or currency-based crises. These crises include investment market declines, inflation, war, and social unrest. Investors also buy gold during times of a bull market to gain financially. Investors generally buy gold for two main reasons: to financially gain from increasing gold prices, and/or as a hedge or safe haven against any economic, political, social or currency-based crises.If the return on bonds, equities and real estate is not adequately compensating for risk and inflation then the demand for gold and other alternative investments such as commodities increases.
As Dong has suggested;
Gold has been prized for its rarity, its beauty, and most importantly, for its unique characteristics value when it is stored for thousands of years. Gold is unique asset. This is because it is both, primarily a monetary asset but also, partly a commodity. As much as two thirds of gold accumulated is held in holdings such as bank reserves and private investment – thus, a monetary asset. The other third can be considered a commodity - used in jewellery and other industries. Due to this, Gold is able to maintain its value over the long run, while other commodities decline.
In general, Gold is used by investors as a means of diversification. Diversification helps protect a portfolio against fluctuations in the value of any one-asset class. Gold is an ideal diversifier, because the economic forces that determine the price of gold are different from, and in many cases opposed to, the forces that influence most financial assets. Also, many other traditional diversifiers are known to fall in times of market stress and instability – Gold is able to respond when investors need it most.
Twenty four hours a day, Gold can be readily bought or sold, in large denominations and at narrow spreads. This cannot be said for most other investments, including stocks of the world’s largest corporations. Gold is also more liquid than many alternative assets. Gold proved to be the most effective means of raising cash during times of market stress such as the 1987 stock market crash, and during the 1997/98 Asian debt crisis. So holding gold can be invaluable in moments when cash is essential. The economic factors that determine the price of gold are different from the factors that determine the price of other investment vehicles. Hence, under such a situation – as is being experienced now, gold is one of the rare modes of investment that shows downward rigidity which acts as a protection mechanism for the investor.
Nations may rise and fall, currencies come and go, but gold endures. In today’s uncertain climate, many investors turn to gold because it is an important and secure asset that can be tapped at anytime, under virtually any circumstances. Its day-to-day performance as a stabilizing influence for investment portfolios is also, equally important. These advantages are currently attracting considerable attention from financial professionals and investors worldwide. It is internationally recognised – hence may be termed as a currency for every country.
In regards to the article – during the Christmas holidays, on the way to Perth, I visited the Karlgoorlie Super Pit, a massive open cut gold mine – about 3 km long, and half a km deep. The sheer scale of this mine was immense, and the constant stream of trucks carting the thousands of kg of rock to the smelter, to produce just ounces of Gold, was astounding. Gold has been mined there for over a hundred years, less and less Gold is being found, but production is being increased due to the huge demand – the whole town, and really, most of Western Australia exists, due to this Gold.
Mr. Nelson, did you mean my response to this article?
I formed this answer myself, using various sources, - it does look a bit clumsy, as I had done it in word, then put the Dong part in front. the most prominent source, or that I can remember was this;
http://economictimes.indiatimes.com/articleshowarchive.cms?msid=364
particularly for the 'downward rigidity which acts as a protection mechanism for the investor', the stuff about the 'asian debt crisis etc' and the phrase present in numerous articles 'Nations may rise and fall, currencies come and go, but gold endures'
Otherwise, I identified and explained;
What Gold Is and Why It Is Unique.
Why It Is Generally Targeted By Investors.
Why It Is, In Particular Targeted During Times Of Instability and Stress. - pretty much explaining why in light of economic uncertainty and risks of inflation demand is so high and why price keeps rising.
I suppose I left out that, it is internationally recognised and can therefore be used as a standard for valuing currency. Is this right?
Otherwise, what else could I have added? or is it structured incorrectly?
I suppose the last two paragraphs are rather superfluous,
but my little story at the end, was both in relation to the environmental aspect (as in the article) and how gold has endured over so many years, and that this demand for Gold over time, is very much responsible for the existence of Western Australia - their 'economy' was very much driven by this.
Nicko, check out this critical little site: www.dailyreckoning.com these guys are crazy advocates of Gold. You can learn a fair bit about their view of reality and markets - just remember it is their view of markets...
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