The value of gold saw its peak in 2011, reaching a record breaking price of $1924 per ounce. In 2013, gold experienced a dramatic price dip, which resulted in losing nearly a quarter of its value. It wasn’t a good year for gold, and it had investors wondering if the price would continue to decline. However, experts have predicted positive outcomes for 2014, despite the loss in value last year.
George Gero, who is a precious metals strategist at RBC Capital Markets, explained that the price drop has led to the allocation of money from gold to the stock market, yet if history has taught us anything, it’s that the success of gold is inversely connected with the success of other financial instruments. Gold has the tendency to thrive when stocks plummet, as it has been speculated to be an excellent hedge against inflation during times of economic instability in the United States. People often forget that gold is a long term investment, and though its price may lower from time to time, this precious metal does have an uncanny ability to retain its value in the long run.
No country is immune to economic recession, but it’s worth noting that gold appears to be more resilient than paper currencies in times of financial turmoil. One example is France’s return to the gold standard. The economy suffered after the French Revolution, as agricultural and industrial output decreased, leading to the complete devaluation of paper money in 1797. It was then that bullion coins became the country’s standard of commerce. Today, gold continues to be an insurance policy for many. Investors can check the live gold price at BullionVault France and see that the price has relatively stabilized around $1200, despite some financial analysts forecasting a continual downfall in the value of gold.
Warren Buffett once wrote, “A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors”. Although Buffett was referring to stocks at that time, Robert Farrington, the founder of The College Investor that was once featured in the Carnival of Financial Planning, believes that his piece of advice is just as applicable to gold investments. That, and also the fact that India and China are the biggest buyers of gold give a more positive outlook for the industry.