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About Gold – An Opinioniated Article Against the Majority
By The Simplified Resource For Investing and Personal Finance  •  January 12, 2009
Gold BarWe met an old finance lecturer today and boy does he look old. He told us to buy Gold because the value of the US Dollar is forecasted to decline in the long run and Gold is deemed to be inversely related to the USD dollar. Should we listen to him? Yes, we agree with him that the US Dollar is highly likely to decline, but still should we buy Gold? As Indians are particularly fond of Gold, we decided to go to Mustafa Centre to immerse ourselves in the big jewellery shops they have there where one would feel like they are in Gold Wonderland, with the precious metal glittering all around you. We spoke to the staff there and all we remember is "Buy Gold". We decided to go back to our garage to be a keyboard warrior to do some research on the internet and most signs point us to buy Gold. Great! Lets look at the charts. Gold has indeed risen extraordinarily,especially since 2005 onwards. The known factors that affect Gold are the following: 1) US Dollar - If the value of the US dollar is declining due to inflation or the Government printing too much money, Gold will go up. 2) Demand of Jewellery - Higher jewellery demand = higher Gold Price 3)Ease of buying and selling Gold - Due to more and more Gold ETFs, e.t.c. As when one makes things easy for people to buy and sell, people will trade more. The combination of the above 3 factors should suffice to explain the rapid increase in Gold Prices from 2005 to 2008. So let us see what Warren Buffet has to say about Gold:
It gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.
As usual, as we don't follow blindly to opinions unless substantiated with data and facts (who cares if he is warren buffet or Jim Rogers or Obama or Hu Jintao or Mother Theresa), we decided to check Wikipedia to find out more about Gold and its uses. Read more...
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By The Simplified Resource For Investing and Personal Finance
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