At one point in time, gold was considered money. Those times are behind us but gold still serves as a safe haven, a reliable and secure store of value when other investments are characterized by a high level of risk. Interest rates and the depreciating dollar are doing even more to make gold appear extra shiny in the eyes of investors.

Instead of thinking of gold as a commodity, think of it as a currency. As the dollar weakens, the bull run for gold stretches on, with no end in sight. Gold prices are continuing to rise and it is not unreasonable to expect them to reach $1,500 in short time. The current price of gold is actually still within the low end of what many analysts declare to be the safe haven range.

Gold’s price still has far to climb to reach its inflation-adjusted record. With the emergence of commodities as a separate asset class, gold has benefitted from the diversification away from other equities. Consumption of gold is increasing in rapidly growing economies like China and India, making the precious metal more rare and valuable.

What has done the most to make gold attractive is the relationship between the dollar and central bank response to the credit crisis. Inflation is poised to rise, causing the dollar to fall in value,  making gold an attractive hedge. Gold supplies are not increasing annually, while the money supply is growing rapidly. As a finite currency, the value of gold is measured against the dollar, sterling, and euro.

Lower interest rates make the low yield of gold less important. If gold was not the best inflation hedge in the past, the economic stagnation and increasing consumer prices make it an ideal store of value. Gold has much life left to live and will continue to be valued the world over for as long as we can imagine.

Keep learning more:

1. Inflation is the Biggest Risk of Bond Investing


2. TIPS 101: Treasury Inflation Protection Securities


3. The Disadvantages of Investing in Bonds


4. Why You Should Avoid Penny Stocks


5. The 3 Basic Stock Investing Strategies


6. Are CD Rates Even Worth It Anymore?


7. What is FOREX?

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