The price of gold is volatile, but throughout history, it has always been valued as a safe currency, unlike paper currencies.
We are used to always thinking in terms of price, but we sometimes have to get out of this rigid scheme if we want to get superior performance from our investments.
If we think in the short term, it is possible that the price of gold can move in any way because the enormous amount of speculative capital in the financial markets can influence the quotations of the precious to a small extent.
For this reason, it is not at all uncommon for gold prices to have a lagged reaction to a crisis.
An example we saw in the credit crash of 2008, gold plummeted along with major stock indexes as hedge funds were forced to liquidate their gold positions to make up for losses in other markets. Subsequently, the price reached all-time highs.
But the most extreme example was the fall in gold prices following the Asian currency crisis, and to a lesser extent during the 2011 and credit crises. Going back, the same phenomenon occurred in the collapse of the stock market in 1987.
There are two reasons gold fell on each of these occasions. The first, gold, as part of some commodity indices, is automatically subject to liquidation along with the other instruments.
Second, gold is sold to raise cash to meet margin calls from other industries. Once these reasons have been met, gold has reverted to its safe-haven status in most major crises.
The bottom line is that gold has always been valued throughout history while paper coins, sooner or later, have always failed. So while gold may not always move in the direction you would expect it to move, it is still reasonable to expect gold to maintain its purchasing power over the long run, whereas paper currencies do not.
Throughout history and in all civilizations, gold has been valued and desired. It offered security in times of political or economic crisis. In extreme situations, having physical gold could make a big difference. Gold is nearly indestructible and will not corrode or rust.
The amount available changes slowly and the amount of gold mined each year is a small fraction of what exists.
Gold has been a ” reserve currency ” and safe haven for thousands of years, and those who understand history know it will always remain that way.
However, to get the most out of your gold investment, it is imperative to conduct analyzes and devote a lot of time and resources to studying this metal. Or read articles and professional analyzes written by expert authors like us.