Why is gold valuable? Is buying gold really worth it?

There is an ancient and mysterious substance in this world that is uniquely loved by ancient Pharaohs, European nobles, or modern investors. It has been a treasure sought after by people since ancient times, its brilliance and value have shone through history, and countless people have fought for it, and some have even given up everything just to explore its mysterious power. Speaking of which, do you know what the topic of this article is? That's right! That's gold. So let's explore this fascinating topic and see what gold really is and why it's so important? And what role gold plays in the modern world economy!

The Past Life of Gold

The history of gold dates back to ancient Egyptian civilization thousands of years ago, when people used gold as jewelry and ornaments and worshiped gold as a sacred object. In the 6th century BC, the ancient Greeks also began to use gold as a metal for currency and as a trade item, and it was widely used in the cultural and artistic fields. In medieval Europe, gold became the main form of trade and currency, and was even used as a benchmark for saving and investing. By the 19th century, with the establishment of the modern monetary system, gold was gradually ceased to be used as a currency by the people and was used in jewelry, industry, technology, and medicine. In modern society, gold has gradually become a safe investment benchmark and is also considered by many to be one of the safe assets in times of inflation and economic instability.

Value and use of gold

The most well-known use of gold is as a material for jewelry. Because of its luster, texture, and plasticity, gold has irreplaceable and unique conditions in jewelry making. It can be made into jewelry of various shapes and sizes, such as rings, bracelets, necklaces, and so on, making gold jewelry a representative of fashion. In addition to jewelry, gold's highly conductive and heat-conducting properties make it used in the manufacture of various 3C products such as computers, mobile phones, etc. And gold has the ability to resist radiation, so it is also used to make medical devices, such as radiation shields. In addition to the applications mentioned above, gold is a relatively safe investment and hedging tool. Since ancient times, gold has been a symbol of wealth and power in human history, and because mining does not easily lead to scarcity of gold, gold prices have been relatively stable and less affected by other factors such as inflation. As of writing, the price of gold has approached an all-time high, breaching the $2000 per ounce level. Gold can be seen from ancient times, and people's pursuit of it has never gone away.

Advantages and disadvantages of investing in gold

The following lists the advantages and disadvantages of gold in a row and explains why:

Advantages of investing in gold:

       
1. Hedging and inflation-resistant: Gold is seen as a hedging tool that provides protection in times of economic instability. Gold is usually relatively hedged when the stock market falls or the currency depreciates.
       
2. Portfolio diversification: In addition to investing in stocks, bonds, and foreign exchange markets, funds can also be allocated to gold to balance the portfolio and avoid some risks. Gold price volatility is less correlated with the volatility of other risk assets, so investors can diversify their portfolios by appropriately hedging their risk by holding gold.
       
3. Global Generality: Gold is valuable globally, so it has high market liquidity and is easily converted into cash.

Disadvantages of investing in gold:

       
1. No Interest: Holding gold is not profitable and does not provide a sustainable cash flow compared to other investment items such as bonds, stocks, ETFs.
       
2. Storage is not easy: Gold is a physical metal that must be stored in a safe place to avoid theft by the wayward. Therefore, storage costs and insurance costs are increased (hence the gold deposit is derived).
       
3. Foreign exchange risk: Gold prices are denominated in USD, so when buying and selling gold, spreads can be created due to the high and low of the exchange rate.

Evolution and future of the gold market

While the current gold price is at a new all-time high, there are still a lot of variables in the future gold market. Here are some important factors that will influence the direction of gold:

       
1. WHEN THE ECONOMY IS UNSTABLE: WHEN THE ECONOMY IS UNSTABLE OR IN A HIGHLY INFLATIONARY ENVIRONMENT, INVESTORS MAY BUY GOLD TO HEDGE AND HEDGE (BECAUSE CASH IS NOT WORTH MONEY), WHICH CAN DRIVE GOLD'S GAINS IN A NEGATIVE WAY.
       
2. International situation: In 2022, due to the Uusian-Russian war, the international situation is tense. In such a big environment, investors will be more willing to invest their money in safe haven assets such as gold, which will drive gold prices higher.
       
3. TECHNOLOGICAL INNOVATION: NEW GOLD MINING AND EXTRACTION TECHNOLOGIES MAY INCREASE SUPPLY AND SUPPRESS GOLD PRICE INCREASES; BITCOIN, KNOWN AS DIGITAL GOLD, IS GRADUALLY ENTERING THE PUBLIC EYE, AND ISSUANCE OF FIXED AND SCARCE BITCOIN HAS THE SAME DEFLATIONARY EFFECT AS GOLD, WHILE THE CRYPTO MARKET IS SHAKY Not fully matured, but Bitcoin is definitely another option when investors invest.

Small knot

Gold does play an indispensable role in the modern economy, and its hedging and anti-inflationary properties make it one of the most sought after investment benchmarks. But sometimes, we also need to have the ability to think independently, rather than buying into the wind. BUFFETT SAID, “EVEN IF GOLD FALLS TO $800 AN OUNCE, YOU WON'T CONSIDER BUYING IT,” BECAUSE BUFFETT BELIEVES THAT GOLD IS AN UNPRODUCTIVE ASSET AND THAT IT WILL NEVER PRODUCE ANYTHING, AND PEOPLE BUY IT JUST IN THE HOPE THAT SOMEONE WILL SPEND MORE MONEY TO BUY IT IN THE FUTURE. This does not forbid us to reflect, what is the real reason to buy gold? Or maybe it's just a massive scam that's been going on for thousands of years?