Have you ever wondered why gold is so valuable that investors have been continually adding more to their stock pile and gold buyers are offering consumers top dollar? National Public Radio released an expose that tries to answer that very question. Here is what the news organization found:
- Chaotic economic times usually drive the price of gold to all-time highs. Gold appears to be the official tracker of investor fears, as its value rises and falls depending on economic projections.
- After many countries went off of the gold standard and decided not to back their currencies with gold, it became an instant hedge bet against those currencies.
- Centuries ago gold was pretty common and easy to find. People tended to collect gold because it is a beautiful metal. Once it became scarce and was used to back currencies, its value steadily increased.
- Gold is a tough and resilient metal. If one were to throw a piece of gold into the ocean for 100 or more years, it would be able to retrieved and found without oxidization.
- It can be denied that gold is still the favorite choice for necklaces, earrings and rings. Gold is not only seen as an investment for monetary gain, there is also an emotional tie to gold items given as presents or handed down over generations. The more gold that is mined and used for or such objects, the scarcer it becomes. Scarcity drives value up more than most factors.
Toward the end of the NPR article mentioned above, it points to an interesting discussion in the US congress. Ben Bernanke was asked by Congressman Ron Paul why the central bank holds large masses of gold. Bernanke’s simplified response was that the bank holds gold because of tradition, not because it wants to leverage its value. Paul seemed to be skeptical of this answer for several reasons, one of which may be that the Central Bank knows that gold is an element the organization can fall back on no matter what happens to the economy.
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