Is Gold a Solid Investment?

Is gold a solid investment? Of all the precious metals, gold is still the most popular investment. Investors buy gold as a safe investment against economic, political, or currency-based crises such as market declines, inflation, war or social unrest. Like all other investments, the price of gold is driven by supply and demand. Most of the gold mined still exists and could come onto the market depending on whether individuals are hoarding their supply or willing to sell due to high prices.

The price of gold is not driven by production (as with most market stocks), but is done according to the willingness of current owners to part with a portion of their gold. Of the 2,500 tons of gold mined annually, only 500 tons goes to traded gold funds and retail investors. Over 19% of all above ground gold belongs to central banks and official institutions.

Russia and China have both shown recent interest in adding to their gold reserves. The price will increase due to their willingness to purchase. Gold is desirable to those who fear bank closings. Low or negative interest rates, the return on bonds, equities and real estate not compensating for inflation or risk increases the demand for gold. These are reasons why many today think gold is a good investment.