The price of gold per troy ounce recently went over $1900. Like many people who are thinking of investing in gold, you might think this represents a topping out and that it may be too late to buy gold. Granted gold prices have risen over 30% this year and over 400% over the last 10 years. However, the reasons that investors put their money in gold, as a safe haven investment, have not changed and, in fact, have gotten more compelling.
Reasons for investing in gold
Gold prices rise during times of economic uncertainty. If anything, the global economic crisis that began the rush to safe haven investing has only gotten worse. Current and projected debt in the US and Europe and the failed or delayed attempts, on the part of governments, to find solutions to that spiraling debt have caused an erosion of confidence by the investment community that governments can find and agree on workable solutions. The downgrade of US debt was a blow to investor confidence that could have been avoided if legislators had been able to find common ground and make the needed cuts in spending and spending growth. Political and economic situations like this result in economic instability and a rush to safe haven investments. The situation is not improving and is, in fact, getting worse.
Inflation adjusted gold valuation
Gold prices were at $873 a troy ounce in 1980. Based on that price and considering inflation, the comparable valuation of gold would be close to $2400 a troy ounce today. Economists have actually suggested that gold could reach as high as $2500 per troy ounce this year. Even with current prices at over $1900 per troy ounce that still represents considerable upside, which is fueled by a nervous and uncertain investment environment.
The case for owning gold
Investing in gold is easy, with gold bars and bullion coins as the most popular types of gold investment. Gold bullion coins come in various sizes and a range of prices which make owning gold easy, affordable, convenient, and a sensible safe haven in a very uncertain world. Volatile currencies and a volatile stock market make a strong case for investing in gold, at least for part of your portfolio. Gold can still be a sensible strategy to protect your assets.