Go For Gold

Gold – the investment of the Pharaohs. The precious metal has been highly valued since antiquity for its rarity and lustre. For investors today, gold serves as a store of value and the “asset of last resort” in a diversified portfolio, as well as a nice touch to decorate an arm or a neck.

Gold has three basic functions: it’s a commodity, it’s a currency, and it’s an asset. Its main use, as the table below shows, is as a commodity: the raw material for jewelry and some electronic uses, notably connectors. As a currency, it’s considered the one currency that doesn’t have a central bank to mess it up – the supply is limited by the amount that can be dug out of the ground, not the amount that a high-speed printing press can create. It’s also seen as the one currency that will always be accepted in any circumstances, even if the global financial system collapses. And as an asset, it’s viewed as a “store of value” that will protect one’s assets from the predations of governments and business cycles.

The price of gold fluctuates continually during the day, much like the price of any other asset or commodity. The London Gold Fixing establishes a benchmark price twice each business day (10:30 AM and 3 PM, London time) in dollars, pounds and euros for pricing gold products and derivatives. China, the biggest producer, importer and consumer of the yellow metal, recently started up a twice-a-day gold fixing in Shanghai. That is denominated in yuan and so has yet to get much traction outside of the country.

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