Why buy gold? That’s a question many investors ask when they’re considering diversifying their portfolios.
In considering the question, a look at the historical uses of gold in world cultures helps us understand its lasting value and how it protects your wealth through all economic cycles.
While there was some trading prior, the New York Stock Exchange was officially founded in 1817. That’s 200 years of trading corporate stocks on a major exchange. Uses and trading of gold has been verified through documents and historical records going back to around 3,000 BC. That’s more than 5,000 years of gold being considered a desirable commodity for trade, jewelry and other valuables!
Let’s look at a snapshot of gold during the 200 year lifetime of the NYSE. In 1817, the price of gold was $19.39 per ounce. When the market closed just before Christmas 2016, the price of gold was $1134.50 per ounce. Yes, there were a lot of ups and downs during that period after the U.S. stopped fixing the price of gold. As in every trading market, there are cycles when prices rise and fall. However, gold owners know that buying and holding gold as a hedge against inflation and other economic uncertainty isn’t about speculation and quick trades (or it shouldn’t be). It is a long-term strategy to secure the overall value of your different investments and preserve your wealth. In looking at 10-year increments, we see that this is a smart strategy. It was 1974 when President Nixon reversed President Roosevelt’s ban on Americans owning gold. So let’s start in 1975 and look at the annual gold closing price in these 10-year increments:
|Year||End of Year Closing Price|
It’s not just about increasing in value. There are the other attributes of gold as a hedge against inflation and the fact that it always has a tangible value, which cannot be said about printed money. Again, this isn’t a short-term trading strategy. Instead, it's a holding and long-term protection, diversification and ROI strategy.
Gold has held its allure for people for more than 5,000 years, and that isn’t likely to change. Whether it is held in the form of jewelry, coins or bullion, gold will always be in demand and valuable for trade, especially when inflated paper money is contributing to inflation and economic uncertainty.