The recent popularity of gold has caught many investors by surprise. Valued at just over $300 at the beginning of 2002, the price of an ounce of this precious metal has since soared and is presently worth just over $1,600. A number of proponents of gold have predicted that this precious metal will pass $2000 per ounce very soon.
Not everyone has been impressed by its gains, though. First of all, gold has come down from its all-time highs in the last year, when it was worth more than $1,900 per ounce. For a while, as the value rose, people spoke of a gold bubble. They compared it to the dot com bubble and the housing bubble, expecting it to pop soon and with similar circumstances. Among the deniers of gold’s high value was billionaire George Soros, whose financial wisdom many people respect.
Many people also compared the present to the early 1980s. Back then, gold values soared to over $600 before settling back down closer to $200. They said the same would happen this time.
How Are Gold Investments Doing Now?
Yet, the same evidence that people quote to demonstrate the failure of gold really shows that this time around, things have changed. If things had really gone the way that they did in the 1980’s. Gold has surprised everyone by staying resilient. Now it is making little jumps that suggest another boom is coming.
Why Won’t the Gold Rush Fizzle Out?
So why does gold hang on to its high value? Alarming numbers of people still invest in gold every day. What keeps them so confident in their gold investments? Normally, when a run begins the price of an asset such as this can drop precipitously as other investors follow suit and sell out to save their profits or avoid loss.
The secret is that gold maintains its purchasing power. More than anything else, investors right now are disturbed by the lower purchasing power of their cash. They do not want to risk their money on a volatile stock market so they put it somewhere that it will keep up with inflation. That place is gold.
Why Is Investing in Gold a Protection Against Inflation?
Governments have been pumping out new currency at an alarming rate. Many people who do not think too hard about economics think that this is a great idea. After all, if people need more money to pay bills and service debt, it is easier to just print the money than earn it. This seems like a painless way to solve economic problems.
However, this just creates new problems. Certain laws of economics are written in stone. If there is more of a certain thing from one day to the next then each unit of that thing will be worth less than it was the day before. No matter how hard people want to make things different, this remains the same. If the total financial power of the United States were backed by $1 trillion one day and then by $2 trillion the next day, the value of each of those dollars has been cut in half.
So the value of the dollars that people have in their wallets and their bank accounts is actually much less than it was just a few years ago. Not so for gold. Gold retains its value.
If you think the price of gasoline is too high, you should try paying for it with gold. In terms of this precious metal, as in a cost comparison, gasoline essentially costs less than it did ten years ago. Gold is nearly five times as valuable as it was in 2002. The price of gasoline has only tripled since then.
There are informational portals online, such as IRA Investment that provide a wealth of information regarding gold IRAs. These portals will provide you with all the information you need to make an informed decision regarding which type of IRA is best for your needs. As long as you understand the rules and regulations regarding these accounts, they can be an attractive way to invest in gold while still enjoying the tax benefits of an IRA account.