There are a number of reasons why people buy gold. It’s not just because it is an appreciable asset that does well in times of inflation but also because it is safe or it has some cultural significance. Some own gold as an investment for the future. They may like to speculate when the price of this precious metal will go up or down. Whatever your reasons are for having gold, the core reason is the same: gold has always been valuable and it has appreciated over the long term.
Gold is valuable because it is a rare resource that is available in a finite quantity. Gold is soft which makes it a good metal to use in making jewellery. However with the advancement of technology, gold ha been increasingly being used in the manufacturing and trade industries.
Furthermore, gold is so resistant to corrosion and its non-reactive nature has become the ideal component used in electronics and in dentistry.
The demand for gold has increased but the supply has not increased. There are no new mines being discovered. Infant, a lot of the mines that have been producing gold have either reached their lifespan or are about to. The global production of gold is short by at least 1,045 tonnes a year. The amount of gold that we need is more than what the mines can produce. As mines shut down, the economy struggles, demand rises there are even more people buying gold. There are more individual investors buying gold. Surprisingly enough there are more some rich individuals whose foray in the gold market has raised some interest.
Who are these wealthy investors?
Back in 2007, John Paulson predicted the fall of the housing market. As crazy as that was, his prediction turned out to be true. John Paulson became something of a legend when the 2008 economic crash finally happened. By then Paulson had invested a lot of his money in gold both physical and paper gold.
Druckenmiller is known for having immense faith in the yellow metal. He dumped his gold holdings the night before Donald Trump got elected as president of the United States. He has since, picked up his gold investment and has been reinvesting his wealth in gold and other precious metals.
George Soros has been a big advocate for gold for a very long time. When others say gold isn’t real money he puts more of his wealth in it and this has paid off.
Gold dealers have benefited from the actions of these wealthy people. The best thing about this is that regular people are also benefiting. There is more information out there about investing in gold than ever before especially with the global economy being affected by so many factors.
Institutionally, the United States government has been the biggest buyer. In the past, this was true mainly because of the Gold Standard. Fifty years ago, the Gold Standard was used to ensure that the dollar had actual value. Gold was used to back the U.S dollar until the whole gold standard was abolished in 1971.The gold standard might no longer exist but a lot of countries still hold gold reserves for the same reason- to back up their currencies.
The jewellery industry is the biggest consumer of gold, this is the main reason why a lot of gold dealers buy gold jewellery. Most people get to interact with this precious metal through jewellery. If you have gold jewellery then it might come in handy when you are in a bind and you need cash in a hurry.