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PROS AND CONS OF INVESTING IN GOLD
Reasons to invest in gold
- The price of gold has been going down since 1980, and gold is cheap. If you are a contrarian investor who believes in buying when prices are low, now could be a good time.
- Once the price of gold starts to rise, banks which have large gold reserves will not want to sell it cheaply.
- Several gold funds have hit yearly lows, so a pick up may be imminent.
- The American economy could be slowing down. A decline in the value of the dollar could lead to soaring gold prices.
- Consumption of gold has exceeded production for the past 8 years, and with gold prices dropping; some gold mines have decided to scale back production. This could lead to an eventual upswing in the price of gold.
- With Asian countries recovering from the financial crisis, gold demand is picking up.
Reasons not to invest in gold
- Price of gold has been mostly going down since 1980
- Central banks have tonnes of gold bullion which they could sell at anytime, thus flooding the market and bringing down prices even further.
- Gold funds have not been doing well for a long time.
- Even though gold funds are less volatile than investing in gold per se, it still is a risky investment.
- Investors must contend with brokerage fees, dealer markups, and storage and insurance costs (if you're buying a lot of gold).
- Gold bullion or coins do not produce yields the way bonds and stocks do.
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