I have always believed in investing in physical assets and when I looked at the entire spectrum of assets in precious metals like gold, silver, copper, platinum, the 2 most realistic metals that I can physically hold are gold and silver. However, in today’s post I’m going to share some of my thoughts on gold.
Traditionally, gold has been the universal standard for money. Gold works well as an investment when the world’s major currencies are not doing well.
I was first introduced to gold investing in Singapore when a friend shared with me the importance of investing in gold. Back then, the market was still booming and those who invested in traditional assets such as stocks or mutual funds were getting good returns on their investments. Gold was then worth $650 an ounce.
I was interested in investing in physical gold and started researching gold. I even visited UOB Bank as it was the only bank in Singapore that sold gold bullion. I first bought gold when it hit $930 an ounce. It was unfortunate because it took me months to understand gold as the quintessential hedge against inflation and the interaction between money and currency.
I soon realize that when prices rise rapidly and the value of paper money or currency declines, people turn to gold first. That’s been true looking at past records, and I’m betting because I’m pretty sure it’s going to be true for the next decade.
There are several other reasons why I invest in gold:
First, no other investment has the same wealth-preserving power as gold. Unlike paper assets like stocks or bonds, gold will never lose its intrinsic value. In fact, it will always be in demand, and the demand is constantly growing.
Second, the current US debt crisis will only push gold prices higher as people look for a safe haven to park their money. That’s why I always recommend that gold be part of every optimally diversified portfolio. Being an inflation-resistant investment, gold was supposed to retain its value during political and social upheavals, wars, and natural disasters.
Third, we hear that China has doubled its stockpile to 1,054 tons. Gold is bought carefully so as not to stimulate the market. In fact, the government is telling its people to buy gold. Moreover, each bank will sell gold and silver bars in four different sizes to individuals, and China’s largest bank, ICBC, is setting up a precious metals division to meet growing investor demand.
Where did all this gold come from? Well, when 1.3 billion people start buying one ounce coins, heaven only knows. China is already the largest producer of gold, displacing South Africa last year. It will soon replace India as the largest consumer.