What Is The Gold Standard?
Gold is often used as a metaphor for reliable worth. It is true that gold has never been worthless for the whole of human history, and it has outlasted every currency. While existing legal tender continue to devalue, gold rises relative to currency, because the supply of gold cannot change. To invest in gold is smart, because in theory it should store wealth forever.
The reality is that the supply of gold on the market is in a constant state of fluctuation. The total gold in the world increases at a predictable rate, but it is not always on the market. Private investors, financial institutions, and governments all hoard it as a security.
Gold is typically bought while the price is rising. When the peak has been reached, often major financial institutions will start selling. They will liquidate their stagnant gold for other assets. This might trigger a flood of selling, and then gold will be suddenly cheap. This is a good opportunity for someone who previously has steered clear of the gold market.
The value of gold is created by the fact that end consumers buy tons of it every year. The rest of the value is created by hoarding. Between the base value of consumption and the extra value created by investment is the gold standard. World currencies are still compared to gold as a way of assessing inflation, even though most have been taken off the gold standard.
The ideal time to buy gold is when it is at the bottom of a selling trend. It will eventually pick back up. Sometimes gold will continue to fall for a while but a smart investor has patience. Gold always goes back up. It is just a matter of time. There is absolutely no reason to have to waste money on gold when it is one of few commodities that is guaranteed to rebound.
It might be a good idea to buy gold today. The price of gold has been falling in the past month, and has been falling since a high a year ago as skittish investors are bringing their money back into the bond market. Many investors have the strategy to put their assets in gold during a bad market, causing the price to rise. Now they are leaving, it might be a good time to scoop up some precious metal as a long term to mid range investment.