Guest Post, Investing

Gold Investment & The Dollar

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By Elisabeth Powell

Over the course of the last several years, the economy has been relatively turbulent and unpredictable, as well as, on the whole, weak. The U.S. economy has been experiencing difficulties on just about every level, with the result that people are struggling with their investments and the dollar has become less reliable than it once was. Because of these facts over the last few years, it is easy to understand why many people turned to alternative investments in order to protect their wealth. For example, one sort of investment that can be particularly popular when major world currencies such as the U.S. dollar are struggling is the purchasing of gold bullion.

Buying gold bullion is in a way a strange sort of investment in that it simply doesn’t work the same way that investing in a company or industry might. Instead of purchasing shares of a greater company, when you buy gold you are literally purchasing physical gold pieces, to be stored as you please in a secure location. In this way your gold becomes a sort of alternative form of wealth, and you are free to hold onto it for as long as you like, until you decide that selling would be beneficial. Generally, people who practice gold bullion investment do so with more of an aim at preserving their wealth than increasing it significantly, as the value of gold rarely experiences significant or dramatic shifts.

Essentially, the point of gold investment is to weigh gold prices against currency value and make decisions accordingly in order to benefit financially. For example, when the U.S. dollar is struggling and its value is decreasing – as has been the case for a large portion of the last decade – the price of gold often rises as people grow weary of trusting the dollar. Therefore, if you were to purchase gold in such a situation, and then the dollar decreased more in value, you would have avoided taking the financial hit. Instead, your money would be tied up in gold, which would then likely increase in value as more people stopped trusting the dollar. It can be a great deal more complicated than this, and there are more factors in play (such as the euro and other world currencies), but these are the basic concepts that you may want to consider in difficult economic times.

The current economic climate in the United States, however, is very difficult to read when it comes to gold investment strategy, or really any investment strategy. Though unemployment rates are still high and job growth relatively slow, there are other signs that the U.S. economy is strengthening, and the dollar specifically is looking stronger than it has in some time. This is due to a number of different factors, but one worth noting is that with the euro struggling, people seem to be investing in the dollar, rather than in gold. This has resulted in the outlook for gold being weaker than expected for the end of 2012, which means you may want to wait before choosing to invest in gold. However, these things can change relatively quickly, so the important thing is to keep researching and keep your eyes open for a strong investment opportunity.

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