Gold

It was in early January in the year 1848 when a California man bent down into a stream and retrieved a yellowish metallic rock. Almost as quickly as he could stand up and proclaim, “It's gold!” the California gold rush was on. Gold fever spread quickly throughout the continental U.S., and gold continues to be an investment opportunity for individuals today.

Gold at a Glance

In scientific terms, gold is a metallic element represented by the symbol Au on the periodic table of elements, and is measured in both carats and fineness. By the end of 2001, the world had mined out about 145, 000 tons of gold. The United States leads in national reserve gold ownership, and India is the leader in gold jewelry ownership, but no one knows what individual owns the most gold in a private portfolio or jewelry box.

Why is Gold a Commodity?

The importance and value historically placed on gold relates directly to paper money. Money began simply as currency valued on an underlying commodity, and gold is a commodity. As other commodities are traded based on projected supply and demand issues, so should gold be as well. The one difference that gold may boast over its fellow commodities is that in the face of a financially catastrophic event in world markets, gold may be viewed as a form of insurance. Gold can also be a form of insurance during steep inflation or hyperinflation times, when it will hold its purchasing power steadier than paper money will. Gold is not traded in actual form, but as gold certificates that represent the holding rather than the gold bullion to make trading much easier and more efficient.

Investing in Gold Mines

Another form of gold investment lies not in the purchasing of certificates or bullion, but investing in a mining operation. Mines may be perceived as an alley that only a venture capitalist would journey down, but there is enough information concerning mining companies and their portfolios available to do some in-depth research on past and future results.

Be sure to note if the company mines any other metals such as silver that may bump the profit margins but skew the actual numbers where gold is concerned, and always read a prospectus and heed the advice of licensed brokers. No matter the commodity, from soybeans to gold bullion, it is imperative to be as informed and educated before sinking funds into any investment.

By Barbara Poelle