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  • Throughout history, gold has always been seen as one of the greatest investments one can

  • make. Currencies come and go even the U.S. dollar would probably be worthless someday

  • in the future, but gold has never lost its value through millenniums.

  • Gold is used in a wide range of industries. Some make jewelry out of it; others use it

  • in the manufacturing of certain electronic and medical devices. And others invest in

  • it like you probably, since you are watching this video.

  • As of April 2020, the price of the gold is $1657, significantly higher than it was let's

  • say 50 years ago ($300).

  • But the question is, is gold a good investment? Or to be more precise, has gold been a good

  • investment? Well, the answer isn't really that simple.

  • Since the abundance of the gold standard, the world has been overwhelmed with paper

  • currencies. It is even difficult to imagine a world where gold is a currency.

  • But it has been once upon a time not that long ago. However, the modern financial system

  • is so complex that we can no longer go back to the gold standard.

  • But what we want to explore in this video

  • is, If you have some extra cash in your piggy bank, should buy gold instead of stocks or

  • even real estate. But Before we answer that question, we have

  • to understand what drives the price of the gold first.

  • So, Besides having a unique and beautiful color, unlike other elements. Gold has always

  • been the most trusted currency. Gold has always been used as a way to pass wealth from one

  • generation to another to preserve their wealth. Because unlike gold, paper currency has always

  • been quite worthless in the long run, but gold has maintained its value throughout the

  • ages.

  • The U.S. dollar has been the most important currency for the last hundred years. Even

  • today, countries all across the world have stacks of U.S. dollars in case of emergencies.

  • But even the U.S. dollar isn't a safe heaven because the value of the dollar falls based

  • on the actions of the FED and the governmentDuring the margate crises, the economy was

  • in a deep hole, and the only way the government could save the economy was by injecting trillions

  • of dollars into the economy to keep the dice rolling again. But that pushed the investors

  • to buy more gold and doubled the price of the gold in just four years (2008-2012). In

  • fact, prior to that, between 1998 to 2008, gold prices have tripled.

  • Historically speaking, gold has proven itself to be an excellent asset against inflation

  • since its price rises together with the cost of living. In fact, whenever inflation significantly

  • rises, the price of gold simply soars. And with the modern financial system, financial

  • crises happen quite often.

  • But a financial crisis means chaos, and that means uncertainty. When it's not clear where

  • the economy is headed, people want to feel that their wealth is safe, and that's why

  • they turn to gold. During any crisis, gold often becomes the safe heaven that investors

  • look up to. Since, they are confident that, no matter what happens, gold is going to keep

  • its value.

  • Even when there is a deflation, when prices are decreasing as it was during the great

  • depression, gold prices rise.

  • But that's not all, whenever the public loses confidence in governments, they also tend

  • to turn their reserves into gold quickly. Because political instabilities can lead to

  • chaos and financial crises. Gold prices, for instance, grew during this Brexit deal. When

  • world tensions rise, gold prices usually outperform all other investments.

  • But one can argue, with all the technological

  • advancement we have today, what is stopping us from miming more gold and a huge supply

  • would drive the price down.  Well, even with modern technology, it's

  • not easy to extract gold. Gold mining production has not changed significantly

  • since 2016. And the main reason for that is, "easy gold" has already been mined; miners

  • now have to dig deeper to access quality gold reserves. And that is much more challenging

  • and raises many other problems. Miners are exposed to additional hazards, and the environmental

  • impact is heightened. In other words, it costs more to get less gold. All these factors add

  • to the costs of gold mine production and making it less attractive to investors.

  • Major suppliers of gold in the market since the 1990s have been the central banks, such

  • as the FED, since Central banks keep gold as one of their significant reserves.

  • But since the crash of 2008, even the central banks significantly stopped selling their

  • gold reserves. At the same time, the production of new gold from mines had been declining

  • since 2000. And bringing a new mine into production can take up to a decade.

  • Which all led to the rise of gold prices. The demand for gold might decline temporarily

  • from time to time, but it always rises back because Golden jewelry is part of many cultures,

  • which means that there will always be a demand even when investors turn to other forms of

  • investments.

  • But that hasn't always been the case. Once

  • upon a time, not that long ago, gold was the international currency of the world and wasn't

  • only used in the manufacturing of jewelry. I know that its difficult to comprehend that

  • just a hundred years ago, people actually used gold as a currency.

  • To understand how did we entirely moved out from gold and are completely depending on

  • fiat currency. We have to take a look at the history.

  • For over 5000 years, gold with its scarcity and beauty has captivated humankind like no

  • other metal.

  • For the first time, gold was used as solid coins around 700 BC. Before that, gold had

  • to be weighed and checked for purity when settling trades.

  • But these coins were not without their problems. They have been used in different shapes throughout

  • centuries.   However, the biggest obstacle was that gold

  • was simply too scarce, and digging it from the ground was much more difficult given the

  • technology they had in the past.

  • To understand how scarce was gold back then. In the 16the century, Spain extracted so much

  • gold from the New world that it raised Europe's supply of gold by five times.

  • Of course, paper money was gaining some popularity back then, but gold was still the main instrument

  • of the monetary system.

  • But as the world economy started to rely on debt more and more, paper money slowly began

  • to dominate world economies, but it had its fair share of problems. So the world came

  • together to create the gold standard at the end of the 19th century (1871).

  • It actually worked pretty well, inflation was at around 0 percent, and the world found

  • a common language to trade until the world decided to destroy each and started world

  • war 1. Even though the gold standard did not collapse, political alliances changed; governments

  • began to run out of gold, and national debts soared, which pushed the world to move to

  • something more flexible to base on, the world economy. Especially since gold supplies continued

  • to fall behind the growth of the global economy, which ended in a few nations holding most

  • of the gold reserves such as the United States and Britain.

  • The great depression (1929) made it only worst. War debts forced many countries to abandon

  • the gold standard. Even England had to get out by 1931.

  • and guess what happened after WW2, the U.S. had 75% of the world's monetary gold, and

  • the dollar was the only currency still backed directly by gold. But as other nations began

  • to rebuild their economies, gold slowly began to leave the United States, especially with

  • the war in Vietnam. The U.S. Went into a deficit and was afraid that it would run out of gold.

  • Countries like Belgium cashed in dollars for gold, and many others were intending to do

  • the same, which pushed the united states to completely abandon the gold standard in 1971,

  • which was the end of the gold standard. The truth is, although gold has always played

  • some role of currency for thousands of years. A true international gold standard existed

  • for around 50 years (1871 to 1914).  And today, the price of the gold is determined

  • by the factors we have discussed earlier. However, the main question remains, Has Gold

  • Been a Good Investment?

  • Well, the answer is both yes, and now, it highly depends on the time frame. Sometimes

  • it outperformed other investments, and other times investing in stocks or bonds would have

  • been a much better option. Gold might be a solid investment, but its definitely not the

  • best all the timeIf we take a look at the last 15 years, yes,

  • gold (%278 increase) did actually better than the stock market ( 173%), but if we take a

  • longer time frame such as 30 years, then the stock market has significantly outperformed

  • gold. The Dow Jones industrial average has gained ( 839%) while gold only (280%). Even

  • returns from corporate bonds ($450) have been higher than gold.

  • However, if we take even a longer time frame, such as since the abundance of the gold standard

  • ( 1971), gold (4,500%) has outperformed the stock market ( 3,221%) by a reasonable range.

  • Are they going to be a good investment during this crisis, well, its impossible to say,

  • maybe it might be, maybe not. Only time

  • will tell.

Throughout history, gold has always been seen as one of the greatest investments one can

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How To Invest In Gold For Beginners

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    Summer posted on 2020/09/06
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