Gold Market: What is It Really Like?

In the big world of finance, the gold market is considered unique because after all, gold in itself is unique. So much more than being just another investment, gold is regarded as an asset in its own right, a natural resource, a raw material and a medium of exchange and trusted store of value.

Gold plays even more roles in many lives compared to other commodities, expect water of course, and possibly oil,

The variety of roles of gold and its broad utility implies that the gold market is a far cry from other markets.

Gold tends to react different to the geopolitical and economic factors which affect the financial markets.

For instance, hyperinflation, which is historically terrible for bonds and stocks, urges people to lean on under the shelter of gold’s safe haven. Gold also historically enjoyed increased value during those high inflation periods.

The same thing applies for other factors.

A geopolitical crisis, like sudden attacks of terrorists and threat of war, often lead to an increased gold price. During the wake of September 11 attacks in 2001, the United States stock markets experienced interruptions for one week yet gold managed to rise in value and continued trading globally during the entire period.

The currency crises, like the ones that took place in Mexico back in 1995, Asia in year 1997 and in Russia in 1998 caused dramatic disruptions in the local markets. However, in each of these instances, gold also saw a dramatic increase in value relative to local currencies.

Crises in banking, such as the one which took place in the United States in November 2008 also tend to be difficult news for stock markets. But, gold retains its value as more people look for safe havens.

All in all, the types of factors which have the tendency to make the value of bonds, stocks and other assets suffer, result to a completely different effect on gold as it enjoys an increase in value. Of course, there will always be exceptions yet for the longest time, this axiom has stayed true. When paper zags, gold zigs.

The gold market also has other interesting aspects that set it apart from the rest of the markets. For example, there are further ways on how you can own gold compared to other asset class. You get the chance to own physical gold in the form of coins, bullion bars or wafers. Good examples of coins include South African Krugerrand, Canadian Maple Leaf or American Eagle. Also, you can physically own gold in the form of the rare gold coins. All 3 are available here.

But if you don’t want the added security of owning physical gold, there are also more indirect methods on how you can own gold. There are people who opt to join the gold market through owning shares of companies that refine or mine gold. Similarly, mutual funds that acquire stocks of these companies are good alternative offering diversification. Just remember, however, that the method is not going to duplicate direct gold ownership.