Gold Investment, a Profitable Idea

Gold Investment, a Profitable Idea

The general state of the global economy pushes more and more businessmen and ordinary citizens to the land investment in gold objects. They give up risky investments and buy coins and jewelry made of the precious metal.

U.S. Mint sold 92,000 ounces of American Eagle coins last month, four times more than in 2007, according to Financial Times. Also in other countries a strong increase in sales of gold objects has been reported.

The main reasons for people to invest their money in gold during crisis would be keeping their value over a longer period of time, devaluation of the national currency, but also of other currencies, inflation, and low supply and demand. These reasons should be enough to consider investing or at least trying to find out more information about gold and related markets.

The current economic crisis has made gold price increase by up to 25% in the recent months. Thus, economy experts believe that it would be a perfect time to invest in gold. Compared to money or other valuables that pass through the process of devaluation over time, gold retains its value and also has a great importance in the global economic circuits.

Meanwhile, the U.S. dollar, the most important currency on the stock market, influences the gold quotation. Economists have observed that every time the dollar reaches minimum values, gold is more expensive.

According to analysts, in 2009, the dollar should have depreciated because of Barack Obama’s financial sector support plan. A lot of money added to the market lead to a devaluation of the dollar and thus increased the value of gold.

Another reason to invest in gold can be found in history. Gold has an inverse correlation with other financial instruments and this can be observed since the ’70s. At that time, there weren’t so many good investment opportunities, and following a wrong investment could have been devastating and cost you a lot of money. However, the ’80s and ’90s have brought great benefits for various portfolios, but have been weak for gold.

Since 2000 we are going through a favorable period for gold investment, and fairly weak for investing in other financial instruments.

According to a study by Pricewaterhouse Coopers, almost 75% of mining companies exploiting the gold deposits expect gold prices to go up until the last quarter of 2011, and mining company representatives estimate that gold prices will range between $1400 and $300 an ounce. The others think that the increase of gold prices will stop at $1500.

Although nobody can say for sure what will happen in the market, analysts believe that gold price will continue to rise and there are no signs that it might cheapen.