Monday, January 31, 2011

WHY INVEST IN GOLD? (1)

There are many reasons why physical gold is one of the best avenues to invest. One of the reasons is that "The Gold Price will always Increase in the Long Run". Another reason is that "the Value of Money will always Drop in the Long Run".


THE GOLD PRICE WILL ALWAYS INCREASE IN THE LONG RUN

The gold price continuously rises in the long run. To prove it, we shall look at the 10-years graph as well as the 5-years graph of the Gold Price published at http://www.kitco.com/.






From the graph, we can see that the highest price recorded within 10 years was USD1423.70/oz, whilst the lowest price was USD255.30/oz. This is an increase of 557.7% or 55.8% per year. So, if you already bought gold 10 years ago, your gold (asset) is worth 5 times more now. Good, eh?

Let's look at 5-years chart.



From the graph, it shows that since 5 years ago, the gold price has increased from USD538.80/oz to USD1423.70/oz. This is an increase of 264.2% or 52.8% per year.

Here, we can ask ourselves about our current investment. Are our current investments giving us the return that we want? Is our money working hard for us or are we working hard for the money? If you want your money to work hard for you, physical gold nvestment is the answer.

Let's take Kijang Emas as an illustration. Kijang Emas is the Malaysian gold coin produced by Royal Mint of Malaysia and circulated by Malayan Banking Berhad (Maybank).


Between July until December, 2001, the lowest price for 1 Troy ounce of Kijang Emas was at RM1,069. The highest price in 2010 was in 6th December, 2010 which was at RM4,686. This is an increase of 438% in 10 years' time. Thus, you can see that investing in Physical Gold will indeed gives a high return (43.8% per year for Kijang Emas's track record)
Source : Bank Negara Malaysia

So, are you convinced that gold investment is a good choice of investment? How to buy should be you next question.


The other reason of why you should invest in Physical Gold is as follows:-


VALUE OF MONEY WILL ALWAYS DROP IN THE LONG RUN

If gold value rises in the long run, the contrast is happening with money, our paper money. In the long run, the value of paper money deteriorates. The purchasing power in the last 10 years is not the same as it is now.

The value of paper money deteriorates due to inflation.

For example, when I was in the primary school in the 70's (gosh, now have revealed my age!), I was given 20 sen to school to buy my 'mee siput' and glass of syrup.

Now, in year 2011, if I give my children 20 sen, what can they buy? They are lucky if it can buy a sweet.

Now, parents give at least RM3 daily for their children. This means that nowadays, parents has to pay more than 10 times to purchase the same thing we had 40 years ago. This clearly shows the deterioration of purchasing power of paper money in the long run.

Now, you are given a choice.

  1. to keep your money in normal savings, you name them... FD, Current Account, ASB, Unit Trust, REPO, etc OR

  2. invest your money in physical gold

I believe, that you will be making wise decision on your investment. Do ask if you need more info.



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