Buying Gold ... A Safe Investment?

Before concluding it is worth investing in gold or not is interesting to know what this metal is and what are their purposes.


It is true that this is one of the rarest metals on earth (if any existing planet gold was cast, the resultant not give more than a cube with sides 20m - 8000m3) however is a material that, although the their rarity, beyond use in the jewelery industry (bought by people as a form of ostentation) and reserve value of central banks, has a rather residual usefulness in everyday life (application in some industries including pharmaceuticals).

What then makes this precious metal so appealing? (which builds an appreciation of 680% since 1970, ie an annual return of 16% already weighted by the effect of inflation).

There are several reasons why people opt for this "refuge" however, I will highlight only the most important:



1. monetary devaluation (with this "new" policy of the central "print" money banks, it is natural that these depreciates however gold holds its value)

2 Fears against inflation (especially rising energy costs - oil and food, among others)

3 Fears of bank runs, or any bankruptcy (we all know that if there were bank runs they would not have enough capital to repay the deposits, since they are only required to have only a fraction of these deposits, with gold, which is easily tradable, part of the savings would be safe ...)



So let the facts ...



It is an asset that does not generate cash flows journals (interest) logo, in periods in which the interest rate is high, should theoretically have a negative behavior (via the opportunity cost of having deposits p. Former.). It is also documented that in periods of "bull market" (sharp rise in equity markets) this tends to have a behavior that is less than the rising markets.

All this means that even though the graph illustrate an almost exponential rise of gold mainly between 1975-1980 and from 2005 to the present is not liquid that this matter continues to rise ...

However, once the golden rule of financial markets is diversification of invested capital, I think it makes sense to look for this asset, taking into account this principle.

There are several ways to be exposed to gold being the easiest is via investment ETF (should be noted that these are denominated in foreign currencies especially the dollar which carry an additional risk - exchange). Alternatively you will be able to invest in exploration companies-gold, though here, in addition to foreign exchange rate risk political risk since most of these companies are based in countries with difficult political environment namely South Africa and Indonesia.