Why You Should Own Gold
Gold major use is as a reserve although also used for production of materials. An additional role as serving as purchasing power is yet another role gold takes on.
Transactions in the gold market take place 24 hours a day even though markets are in different time zones. Gold is traded in us dollars even though the major exchange is in London.
In the Forex market, gold is neutral, or in other words not tied to any particular country, so that increases in the price influence operations in several currencies. Gold prices are an important driver of forex market.
Given its use as a reserve, the price of gold is closely related to the behavior of other investment alternatives, such as currencies, bonds and equities. The gold price tends to rise when in the midst of monetary instability and lower capital markets. Events such as wars and natural disasters also affect the price.
The real price of gold adjusted today for inflation is much lower than it was in the 1980′s. Although the equity markets have been highly unstable in recent years gold has been rising the whole time regardless of bull or bear equity moves.
In a strong upward trend since April of 2003 when gold was trading at $330 an ounce it is now as recently as December 2009 gold trading at $1,150 which is more than three fold.
Many traders buy and sell gold in the currency market purely as speculative plays trying to make profits from small and large fluctuations in price. This does not mean trading gold is easy, because gold is mostly used as a reserve it is subject to many psychological and monetary factors.
When investing over short time frames you are able to earn large amounts of money however at the same time it can be very risky. You have to weight your investments and risk carefully.
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