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Gold lost about 30 per cent of its value in 2017, raising doubts about the quality of investment in gold and the importance of escaping currency to tangible assets as a result of the erosion of the real value of currencies as they continue to be printed by central banks around the world. Is gold, in general, suitable for investment? Is gold still suitable for investment? What are the ways to invest in gold?
With a brief historical review, gold has grown by about 300 per cent in the past 15 years, while stocks (represented by the Dow Jones Index) have reached about 80 per cent over the same period, although gold has lost 30 per cent of its value this year, At the same time, the Dow Jones rose by about 23 per cent. In other words, except for 2017, gold has grown by over 450 per cent in 15 years, while Dow Jones has grown by 42 per cent over the same period, plus annual dividends of 1 to 3 per cent.
There is no doubt that one of the most important reasons for the rise in the price of gold in the past years is due to the great appetite to be acquired by investors and some central banks who believe that the dollar is in a state of deterioration will continue for many years, and that there is no room to save wealth only through tangible assets, . Despite the negative performance of gold this year, there are many who adhere to the idea of ??investing in gold and does not deviate from it, whether it has risen or fallen.
With a brief historical review, gold has grown by about 300 per cent in the past 15 years, while stocks (represented by the Dow Jones Index) have reached about 80 per cent over the same period, although gold has lost 30 per cent of its value this year, At the same time, the Dow Jones rose by about 23 per cent. In other words, except for 2017, gold has grown by over 450 per cent in 15 years, while Dow Jones has grown by 42 per cent over the same period, plus annual dividends of 1 to 3 per cent.
There is no doubt that one of the most important reasons for the rise in the price of gold in the past years is due to the great appetite to be acquired by investors and some central banks who believe that the dollar is in a state of deterioration will continue for many years, and that there is no room to save wealth only through tangible assets, . Despite the negative performance of gold this year, there are many who adhere to the idea of ??investing in gold and does not deviate from it, whether it has risen or fallen.
What is the reason for the attraction of gold?
The idea of ??investing in gold is based on two hypotheses. First, the purchasing power of paper currencies is constantly eroded. Second, the supply of gold is limited, so the price of gold is always at the mercy of demand, which is expected to last for decades. As for the limited quantities of gold, it is known, as the total of the extracted from gold over the life of mankind estimated at less than six billion ounces, or about 170 thousand tons, and produces annually in the world about 2500 tons, and more than half of the production was during the 100 years past.
This means that the amount of gold in the world is increasing annually by about 1.5 per cent, which makes gold fundamentally different from many other goods that do not have the factor of accumulation, that is, those goods that are extracted and remain on the face of the earth, unlike many other goods as depleted as oil Which is extracted and consumed irreversibly.
But since the amount of gold extracted on the surface of the earth is increasing - that is, the quantity is increasing - under the law of supply and demand is supposed to increase the supply lead to lower prices, the gold price is supposed to fall! The imbalance in this analysis is that demand is growing more than supply, and this is true even in years when demand is relatively modest, due to the weak growth rate of annual gold, which we have seen does not exceed 1.5 per cent.
The idea of ??investing in gold is based on two hypotheses. First, the purchasing power of paper currencies is constantly eroded. Second, the supply of gold is limited, so the price of gold is always at the mercy of demand, which is expected to last for decades. As for the limited quantities of gold, it is known, as the total of the extracted from gold over the life of mankind estimated at less than six billion ounces, or about 170 thousand tons, and produces annually in the world about 2500 tons, and more than half of the production was during the 100 years past.
This means that the amount of gold in the world is increasing annually by about 1.5 per cent, which makes gold fundamentally different from many other goods that do not have the factor of accumulation, that is, those goods that are extracted and remain on the face of the earth, unlike many other goods as depleted as oil Which is extracted and consumed irreversibly.
But since the amount of gold extracted on the surface of the earth is increasing - that is, the quantity is increasing - under the law of supply and demand is supposed to increase the supply lead to lower prices, the gold price is supposed to fall! The imbalance in this analysis is that demand is growing more than supply, and this is true even in years when demand is relatively modest, due to the weak growth rate of annual gold, which we have seen does not exceed 1.5 per cent.
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