Investing in Gold

Ahh Gold, who doesn’t want you? I know I desire you all day long; only if you were 1000% cheaper lol. To those who have the money though, investing in Gold may prove to be a worthwhile investment this 2016. Today we would be taking a look at what makes Gold special and why it is a must have for every serious investor.

Gold has so far been 2016’s best performing major asset. Gold’s year to date gain is 20% in dollar term, 19% in euro term and 24% in sterling term. Report received indicates that SPDR Gold shares attracted $4.55 billion of new money in 2016 alone. The reason for the increased demand might be because of the current condition of global equity and currency markets. Other factors may include the impact of the Chinese slowdown and the 1% rise of the Indian Duty tax, followed by country’s numerous jewelers’ strike and the outlook for Chinese and Indian demand.

Gold Futures

In February, Gold futures advanced by 10% to be traded at a price of $1,230.70 an ounce, and as at today March 4, 2016, Gold is being traded at $1271.50 per ounce. Investors are going long on gold, and data reveals that the net- long position in gold futures and options jumped 32 % to 123,566 contracts in the week ended February 23, 2016 (according to US. Commodity futures trading commission data). Because of the uncertainty of global economic conditions and the current economic slowdown, it is only natural for investors to seek investments in assets said to be safety assets or termed as a haven investment. Gold is seen to be one, and this is what drives the appeal for Gold, and subsequently the price.

If Global turmoil begins to ease as predicted by some analyst and the Feds decide to raise interest rates, then Gold may lose its appeal because investment in gold does not earn interest. Investors profit only on the sale of gold because they do not get periodic interest and gold offers no yield at all. Many analysts are of the opinion that higher and rising interest will pressure gold’s price downwards. This is because bonds and other fixed income investments become more attractive, and then there would be an outflow of money from gold into higher yielding investments such as bonds and money market funds. This however does not mean that Gold would go bearish the moment interest rate is increased as there is no historical correlation between rising interest rates and falling Gold prices.
ETF (Exchange Traded funds) of gold is reflecting the bullish run of the commodity. Investors are raising holdings in gold backed ETFs. It has been revealed that holdings in gold ETFs have been increased by 259 metric tonnes so far in this quarter. It is said that this would be the biggest quarterly gain since June 2010.

So guyz, there you see it. Although gold doesn’t yield interest, it appreciates in value and profit is made when it is sold. Also, Gold can be kept for its aesthetics and show of class. So remember to add gold and other precious metals as  part of your investment plan.

Recommended Reading

Michael Maloney.,Rich Dad’s Advisors: Guide to Investing In Gold and Silver: Protect Your Financial Future