Gold Investing
Gold has long been a fall back investment for individuals during times of financial uncertainty. With the deepening of the current recession, many investors have turned to gold as an investment alternative, driving gold price upward in recent years.
Supply and Demand Economics
Gold is a commodity and like any other commodity, gold price is largely driven by supply and demand economics. In simple terms, the less there is available of a commodity in order to meet demand, the higher the price goes. When supply is higher than demand, the price drops.
Gold supplies have come into higher and higher demand as the world economy has increased demand for gold.
Demand for gold is geographically distributed thoroughout the world, with 72 percent of demand in Subcontinental Asia and the Middle East as of 2007. These numbers are likely to have shifted as the world economy has changed and shifted since then.
Industrial Uses for Gold
Besides jewelry demand for gold, it is also used in multiple industrial applications. It is used in electronic and biomedical applications because of its high resistance to corrosion and bacterial growth. Also it is highly bio-compatible, making it very useful for medical components. Finally, gold is used extensively in fuel cells and other technology-driven sectors.
Gold as Investment
Gold can be invested in as a commodity on the commodities markets. The most popular way to invest in gold in this manner is through gold futures with margins. Margins work by an investor purchasing a small percentage of the value of a gold contract. In essence the investor is making a bet that the gold price will either go up or down. The margin is the difference between the percentage they pay on the contract and the value of the contract at the time it is sold. If the investor bets correctly, then they have only risked a small amount of cash to purchase the contract, but made a profit on the actual sale of the contract. The broker takes the largest risk because they hold the difference between the two amounts.
Another method of investing in gold is to take possession of actual gold coins or bullion This is not the easiest method of investing because of the cumbersome nature of gold possession. Nevertheless, that is one sure way to ensure your ownership is not questioned under any circumstances Investors who want to own actual gold can purchase United States gold coins from a bank or they can purchase coins from gold coin dealers.
There are speculations of the gold price moving up to challenge the $3,500 price mark by end of 2010, but whatever truth may lay in that, it is true that gold is indeed THE hot commodity of the year, and possibly will stay that way for quite a while, so don’t miss your chance.