It is not a secret that gold has comparatively few usages (when compared with other metals such as copper or iron): it has applications mainly in dentistry and electronics. And even here it can be easily substituted with copper or ceramics. Its chemistry and industrial applications are due to its resistance to corrosion (by water and air). To put it in a nutshell, gold is pretty useless.
Why then, is it one of the most sought-after precious metal and why is it so expensive? The answer is simple and resides in the definition of a precious metal as provided by Wikipedia: “A precious metal is a rare, naturally occurring metallic chemical element of high economic value, which is not radioactive.” Besides the fact that it is rare, it cannot be created in lab conditions, it looks good and does not oxide. Because of its last 2 properties, gold was initially used to make jewelry. Gaining in prestige and value, the precious metal acquired yet another virtue, that of guardian of wealth.
There is no time better to prove its latest quality than an economic downturn or financial instability. Due to concerns over Europe`s financial health, investments in gold, be it in the shape of coins or gold bullion bars, picked up lately and as a result raised its price at a record $1,252.11 an ounce on June, the 8th, 2010. And the upswing is expected to continue. So gold is faring rather well under dire economic conditions.
Investors’ gold frenzy has sound economic reasons behind it. Following the default of the subprime industry and the international efforts to bail out the financial institutions, national banks had to print out more paper money which could only spell inflation in the long term. And gold has been seen as a traditional inflation hedge.
Chinese whispers had it in 2009 that China was interested in buying the IMF gold reserves. Of course this information will never be officially confirmed but this goes to show the amount of interest the precious metal came to attract. Pension funds, which normally tend to invest in equities and bonds are slowly turning their attention to gold investments. They have become more and more wary of risks on the financial market and wish to diversify their portfolio.
Source by Jack Wogan
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