If you follow financial markets, then you have probably noticed the recent increase in gold’s market value. This climb has serious implications for financial portfolios and also helps illustrate the power of owning some amount of the precious metal. To help better inform readers on the state of gold as a financial resource, we turned to U.S. Money Reserve, America’s Gold Authority®. Read on for an overview of the commodity and its uses as a financial asset.
Uses of Gold
To appreciate the role that gold plays in the modern economy, it is first helpful to take a look at how gold has been used by different cultures over thousands of years. Uses in the past have included architectural adornments, dental fillings, and even medicine. While these applications for the precious metal might seem outdated to the modern mind, gold is actually still used in these ways today. Its function as a decorative detail in architecture is all around us, its use is still prominent in dental practices, and it even has a role in medicine as a treatment for arthritis.
Part of the reason that gold has stayed in common use for so long is its unique traits of excellent malleability and oxidation resistance. Gold is also a great conductor of both heat and electricity, which is what contributes to many of the other modern uses of the metal. It is commonly employed in electronics like cell phones and computers. It is also often used in the space industry on both spacecrafts and space suits to reflect radiation and regulate temperature. This is, of course, in addition to the metal’s widespread role in jewelry. Clearly, gold has many uses beyond being merely a financial asset.
Gold as a Currency and Commodity
Though many of the practical applications for gold do not seem to be going away anytime soon, it is also often known for its use as currency. The metal, which has often been used in coin form, has also been used by countries as a gold standard to back up other forms of currency. This practice was designed to help people feel confident that the bills and coins they used were tied to a commodity that they could trust. Today, there are no countries that use the gold standard (the U.S. abandoned it completely in 1971), but companies like U.S. Money Reserve still create legal-tender coins made from the metal.
Despite its rare use as a modern currency, gold is still often utilized as a commodity in financial markets. The metal is traded on exchanges, and numerous vehicles are available for those interested in purchasing or selling gold. An example of this is gold Exchange Traded Funds (ETFs). These commodity ETFs track the price of gold and allow you to utilize gold as a financial asset. Of course, gold coins and other physical forms of gold are another way to add the precious metal to your financial holdings.
One of the reasons that gold has enjoyed popularity as a commodity for an extended period is its role as a safe-haven asset. This type of assets is so named because it is often thought to hold its price during turbulent periods in financial markets. This allows purchasers to hedge against the possibility of a downturn in global markets caused by trade issues, currency declines, or other negative economic possibilities.
Gold has traditionally been considered a safe-haven asset because of how it performs when other financial commodities drop in price. For instance, in the wake of the 2008 financial crisis, gold enjoyed an increase in price. This was at a time when many financial vehicles were experiencing severe drops. In fact, since 2000, the price of gold has climbed more than 375 percent, which lends credence to the idea that the metal can perform well when the world’s economy is in a precarious state.
Many experts believe that world economies may be heading for just such a precarious state in the near future. This belief comes amid anxiety over changes in trading practices across the international landscape and is heavily influenced by trade relations between China and the U.S. As tariffs have been imposed on both sides, fears that an economic slowdown could result have taken center stage for many who are deciding what to do with their money. As an example of just how much things have escalated, China recently filed a formal complaint with the World Trade Organization over mounting tariffs imposed by the U.S. With the two largest economies in the world, these two countries engaging an ongoing trade dispute could have lasting implications.
This news comes amid ongoing protests in Hong Kong over mainland policies relating to extradition and policing tactics. It is also set against the background of another large economic change currently afoot—the United Kingdom’s impending exit from the European Union. This latest factor has seen the British pound fall to a 34-year low against the dollar and has led to an increased atmosphere of disarray in the country’s parliament. With all of these worldwide changes beginning to spill over into financial markets, many are wondering if the time is ripe to transition some amount of funds over to safe-haven assets.
Surge in Gold Prices
This atmosphere of uncertainty has seen gold prices shoot up recently, as the precious metal seems once again to be serving in one of its traditional roles as a hedge against market volatility. In the last three months, the precious metal has surged by 20 percent, which has dwarfed the 5-percent growth of the S&P 500. This growth in the price of the commodity has also affected related areas of the gold industry, such as mining. For instance, the VanEck Vectors Gold Miners ETF has seen growth of almost 50 percent during the same time period, outpacing even the growth of the metal’s price itself.
These rising prices have enticed many to purchase gold in increasing quantities. This has resulted in more than 100 tons of inflows into bullion-backed ETFs in August of this year alone. That is the highest rate since February 2013 and is again tied to concerns over rising risk and volatility among other financial assets.
Movement Toward Gold
In light of all that is going on in international markets and trading, U.S. Money Reserve has consistently advocated for the purchase of gold as an asset that can be counted upon. This comes from a heavy degree of institutional experience that is in part rooted in the background of the company’s president, Philip N. Diehl. Diehl, who is a former director of the U.S. Mint, has built a career on understanding the nuances involved with public monetary policy and personal financial security. This experience has become a large part of the company’s culture and has equipped account executives with the unique ability to tailor gold purchases to customers’ existing portfolios.
Central banks brought in over 350 tons of gold during the first and second quarter of 2019 bringing this year’s gold demand to it’s highest in three years. https://t.co/KQwkxlxNrA pic.twitter.com/kpQUSUPA6j
— U.S. Money Reserve (@USMoneyReserve) September 21, 2019
With uncertainty abounding as the state of the world’s economy moves forward, many experts predict that the move toward gold and related commodities will continue. Many who are interested in such a move are turning to trusted names in the field, such as U.S. Money Reserve. With a general conviction that the precious metal is still strong as a safe-haven asset, this could be a move that is quite long-lived. Keep an eye on the changing face of trade tensions and market data to see how this trend continues to evolve in the near future.