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My WealthInflation is Coming - Invest Into Gold

Posted Oct 2010

What is the difference in investing in gold versus other investment markets? Is gold coming back?

Personal finances are a serious matter. Good management of personal finances is not only spending the money in the smart way. The good personal finance management means spending less than earning, while investing the surplus.

But today, in the age of global recession and financial uncertainty it is difficult to find safe ground for your investment. But there is one traditionally way of investing that seems to coming back - the gold.

Recent global economy crisis changed drastically the value system of planetary economy. The global economy crisis affected all markets e.g. real estates, stock market, currency exchange, etc. It is very difficult to find a good investment market.

Inflation is Coming - Invest Into Gold

Today, one of the oldest ways of investing seems to coming back. It seems that era of money that we knew for the last 100 years is coming to the end. Uncertainty of global financial markets forced the investors to move to investment into gold. The ounce of gold today cost five times more than 10 years ago.

Still, is investing into gold really safe and profitable? The answer depends of your expectations and a way how you look at the current economy crisis. If we compare the price of oil expressed in UK Pound, US Dollar, Euro and gold we see that price of gold fluctuated considerably expressed in financial value. The ratio varies between 1:10 to 1:15. But ratio between oil and gold didn’t change much. This means that gold kept the purchasing power over time.

Current trends in global economy are not in favor of currencies. There is tendency that value of global currencies will decline in the following years. Fallen western economies are trying to stay on surface by brute approach – printing of the money. Considerable printing of the money is leading to inflation and hyperinflation.

Increase of the price of
the gold in last 10 years
Price of the Gold in the last 10 years

It is the true that gold had volatiles period in the history. The price of the gold decreased from $850 per ounce in 1980 to $250 in 2000. Today the gold is above $1.300. If we take inflation of dollar into consideration than the value of gold in 1980 is $2.200 of today's value. This means that current real value of the gold is still behind the value that gold had in 1980.

What can we expect from the gold in the future? Global fear of recession increased of demand for the gold. The gold is incrising the value over the period of last 10 years, by average 10% per year.

How much of our personal investment portfolio should you invest into gold? Since the gold has volatile history the investment of 5-10% is reasonable share. If the current global financial trends and gold trends continue, you could gradually increase this ratio to 20% to 30% of your investment portfolio. Josef Stadler, CEO of Swiss USB bank recommends investment of 7% to 10% of portfolio into gold or other precious metals.

It seems that era of gold is coming again. Financial markets were very unpredictable in the near past. Gold seems to give safety for investment and preservation of your personal wealth for the incoming period.


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