We originally wrote this back in 2012 and have modified it slightly for 2015. Not a lot has changed in the last 3 years in terms of reasons to buy gold. The Eurozone is still economically unstable and although things seemed to stabilise a little, they are now looking more uncertain again. The price of gold has dropped over the last three years so is now a good time to buy?? We still think gold is a good investment and as we wrote in 2012, here are the main reasons we think it is a good idea to invest in Gold.
REASONS TO BUY GOLD
Gold As A Safe Haven – Traditionally, gold is purchased by investors as a safe haven when the financial markets are experiencing turmoil. Countries around the world are still having to deal with massive debts and there are serious economic problems in parts of Europe. Buying gold is seen as an alternative to holding currencies such as the Euro and the Dollar. While the uncertainty over how to resolve the debt problems continue, the price of gold is likely to start to rise again.
Supply Is Limited – The amount of physical gold available to buy has been falling. This is in part due to Chinese and Asian investors who are unlikely to sell their holdings, but also due to the renewed interest from the Central Banks who are likely to hold onto their Gold for years to come. A limited supply of gold and a reduction in the amount of physical gold available to buy could lead to a rise in the price of gold.
Inflation – Inflation means that a lot of countries have extremely low interest rates at the moment. As a result, money you have invested in savings accounts is worth less as time goes by. Investors are therefore looking to gold as a means of preserving their wealth. The European central bank has just announced a huge programme of quantitative easing. When central banks print more money as they try to reduce inflation, the demand for gold will likely which will in turn lead to higher prices.
Increased Demand – Over the last few years, central banks have increased their holding of gold. This is particularly true of the central banks from emerging economies who are investing in Gold as an alternative to the US dollar. During the first 11 months of 2011, central banks such as Turkey and Russia purchased 344 tons of gold between them. This increase in the demand for gold could also lead to an increase in the price of gold.
There is a lot of volatility in the price of gold with big upswings often followed by big downturns. Although there is a rising long term trend you should do plenty of research before investing in any form of gold bullion to make sure it is the right investment for you.