All That Glitters: Four Common Misconceptions About The Value Of Gold

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When you think of investing, your mind probably goes to stocks, government bonds, or buying shares in a start-up company. However, one of the oldest methods of investing, and surprisingly, one of the least understood methods, is buying gold. The basic idea behind investing in gold is buying the gold, or buying shares in mining gold, with the hope that it will gain value as time passes, like any asset. However, there are a few things that many people believe about gold that just aren't true. 

1. Gold is REAL money.

The cash in your wallet, for all intents and purposes, is money. It is a currency that buys goods and services from other people. If you see $100 dollars lying on the sidewalk, you instantly think of its value to your life or bank account. Gold has value, that is true, but the world has moved past the point where the dollar is based on how much gold a country owns. In fact, the United States hasn't used the "gold standard" for currency since 1971. Economics have become more complicated than that, and paper money has as much value as society places on it. Your gold investment has intrinsic value, but the currencies that are used across the world now have little to do with the gold sitting in the ground or in the Federal Reserve. You can exchange your gold for paper money, but gold is no longer acceptable for conventional payments. 

2.  Gold is riskier than other investments.

This statement is mostly untrue because it offers an unfair comparison. All investments have built in risks. Buying gold is different from modern stocks because when you buy gold, you have a tangible asset in your possession. True, the value of gold can change-- in 2008, gold prices dropped dramatically as the recession hit. However, unlike investing in a company, which could go under, or in stocks, which could become inflated and collapse, gold has the chance to build itself back up again. So, in some ways, even though the value of gold shifts on a daily basis, it will never be worth nothing. You might have to wait longer to see a return after you buy it, but an asset always has value, even if it ends up being worth less than it was when you first bought it. 

3. Gold is the best metal to invest in.

Gold is the metal everybody thinks about when they hear about precious metals and investing in them. However, gold is just one option. It is a good option, but if you are really thinking about investing in different metals, you should also consider copper, platinum, and silver. These may not sell for as much per ounce as gold, but that is just one side of the equation. When you're investing, you're looking to see which one will give you the greatest return in the future. The demand for gold will increase its price, as will demand for other metals. If more copper and platinum are needed for building homes and electronics, these should also capture your interest. Gold is a great investment option, but it is not the only one.

4. Gold is only used for jewelry, so if no one is buying, its value will decrease.

If you're thinking that gold is only for making rings and necklaces, you are wrong. Although that is the form that seems the most ubiquitous, the value of gold is intrinsically high because the metal lends itself so easily to other purposes. It is one of the best electrical conductors in the world, making it integral in the construction of circuit boards for cell phones and laptops. Gold is also used in the construction of space vehicles because it has a low sheer strength, making it a great lubricant for more brittle metal parts in the vacuum of space. Gold can even be used as a medical treatment for rare conditions like Lagophthalmos.

For more information on buying gold, see this site.