Betting on Gold

In these troubled days all major currencies are going through a difficult period. The US dollar had lost several points as the default problem was solved at the last minute. The pound sterling and the euro have been neglected by the traders because of the public debt crisis that affects major European countries and Greece. On the other hand the Japanese yen is still recovering after the natural disaster that hit the country in March, and affected severely the national economy.

Under these circumstances the gold became the most wanted commodity. The gold is considered a safe investment because its price cannot be influenced by the economic evolution of different countries. The gold price depends only on supply and demand but the global stock of gold remains constant so the only factor that influences the price of gold is the demand.

The total amount of gold mined throughout the history is estimated at about 165,000 tones and its value is about $9 trillion. Much of the gold used for jewelry, goods and industry is recovered and then recycled. The gold that cannot be recycled is replaced by the gold recently mined keeping the gold stocks at a constant level.

All national banks hold gold reserves to back up their national currency and many investors prefer to  gold transform their economies in gold. A quick look at the gold price evolution chart for the last forty years confirms their choice. In early 1970s one ounce of gold was around $60 while nowadays the ounce of gold is traded for $1,800.

Is true that the US dollar lost some of its value but the price of gold is clearly higher than half a century ago. 40% of the gold produced in the world is now in investments and as this figure will remain constant is expected that the price of gold to keep rising so it’s not too late to invest in gold.