Investors may buy gold as an investment because they are either one of, or a combination of, the following:
Asset allocator
Gold, a popular investment and part of many asset allocation models in the 1970s, has largely been abandoned since the 1980s. However, some asset allocators and investment advisors are again advocating it.
Cacheurs (people hiding wealth)
Physical gold can be anonymous. Gold is a very soft metal, meaning that (assuming the gold is in the physical possession of the owner) a bar's serial number can be altered or obliterated with a hammer and chisel. Bullion coins typically will have no serial numbers in the first place. If the bullion's ownership is not recorded anywhere the gold can become untraceable. Cacheurs seek to hide part of their wealth from their spouse, family, tax authorities, creditors, thieves, invaders or others. The density of gold allows them to store a large value in a very small space, without fear of depreciation or erosion over a long period of time.
Central banks
Although central banks as a whole have been net sellers of gold over the last few years, some have been buyers. A central bank may invest in gold in order to ensure that part of its reserves are held in a liquid and tangible form which could be used quickly in times of crisis. Most central banks keep the majority of their reserves in USD, but like any other investor diversification makes sense. The dollar is a liability of the United States of America. Its value thus depends on the USA honoring it in exchange for goods or services. Central banks may fear that in a time of crisis, or if there were a USD crisis, dollars may not prove to be useful. This might happen if sanctions or exchange controls exist. The banking system may make it hard to move USD if restrictions were imposed.
Currency speculator
Since the main gold market is priced in US dollars, speculators who believe the dollar will decline may buy gold. They think that if the dollar declines, the gold price will remain constant in other currencies, thus rising in terms of the U.S. dollar. Gold may also be bought if they feel that a different currency will decline, since they expect the dollar price to be stable, but the foreign currency price to rise.
Financial institutions
Banks and funds may invest in gold to protect themselves against potential loss on gold linked products that they have issued. These may include gold certificates, options, forward contracts, gold linked notes and other products containing a derivative feature linked to the gold price.
Gold bug
Gold bugs, in the traditional sense, believe in, fear, or even hope for another Great Depression or Armageddon, and believe that by holding gold they will survive and prosper.
Hoarder
Some investors consider gold as a long-term store of value and invest in it to maintain their purchasing power. By buying gold and hanging on for the long term, they believe they can keep their wealth intact.
Libertarian
Libertarians may use privately issued digital gold currency, in preference to fiat currency, for reasons such as lack of trust in fractional-reserve banking or monetary policy.
Petroleum speculator
Some have speculated that there is a correlation between the price of oil and the price of gold. The general rule is that the price of an ounce of gold is 10 times the price of a barrel of oil. This is in part because mining gold is an energy intensive process, the cost to mine an ounce of gold will increase as the price of oil increases and in part because they are both commodities and often affected by the same economic stimuli. Source: Buying gold is one way for a speculator to bet on the price of oil going up.
Portfolio hedger
Similar to asset allocators, except the purpose of the investment is to hedge against rapid inflation or unforeseen calamities which may affect other investments negatively. These individuals believe that certain events, if they occur (e.g. war or economic crisis), may have a negative influence on the value of their other investments, but the opposite effect on the value of their gold.
Speculator
Speculators attempt to make a profit by predicting the gold price. They may think that macroeconomics are affecting the demand for gold, or believe they have detected a market trend showing them the future price direction.
Espionage
The survival kit issued to US and British Fighter Pilots includes gold sovereigns to help bribe local officials independent of local currencies . In the James Bond books by Ian Fleming, James regularly travelled wearing a belt containing 20 gold sovereigns.
Gold investment can not only create huge opportunities for profitable investment, but also the fight against inflation, this is one of its advantages. In recent decades, the inflation caused by shrinking national currency is very keen. Shrink to a certain extent, such as paper notes will be general. Value of gold makes its inflation avoid the risk of being eroded. We can imagine 10 years ago to buy a suite and now buy a suite of price differences. Similarly, now choose to buy gold, 10 years after the devaluation of the currency notes at the current gold bullion still have the same purchasing power.
Gold investment in another advantage is that its market is no time limit for. Hong Kong, London, New York, the market formed a 24-hour gold trading market, investors can enter the market transactions. On the other hand, the global gold market no Tingban open and closed, which makes the gold market investment more secure, simply do not have to worry about in the very period can not enter the market.
More people with more confidence that the gold market is very transparent and fair. Any part of the stock market, are likely to be artificially manipulated, but the gold market is the global capital markets, central banks are involved, in reality not a single consortium also can be manipulated with the city's strength, do not worry gold Quotes The so-called Inside Story.
In addition, the transfer of property rights in gold is very convenient. Gold investment compared to industrial investment, such as real estate, transfer very easily, no need for complex transfer procedures. After the purchase of gold, like a gift like the freedom to transfer, no registration system similar to the obstacles, but also at any time into cash.
