Why Gold Still A Good Long Term Investment?

Editorial by 808 Business Network

Despite the recent sell off of the gold ETF, and the sharp drop of gold value below 1400 dollar/once, gold is still a good investment in many people’s eyes.  As of today, gold prices slid $3 to $1,384.40 an ounce.        Indeed many people are taking the advantage of the recent sharp drop of the gold value as seen in Asia where people are entering into the gold market looking into a long term investment.

Several reasons why the gold is still a good investment in people’s eyes despite recent news.

1.  Although it may seems the inflation is well under control, it is still a fact that countries are printing moneys and the debts are rising even for USA.

2.  Investors seem to be pulling off their investment in stocks as the fear and worries of global economy looming.

3.  Many feel that the sharp drop of the recent gold price is more of a manipulation of price

4.  USA has one of the largest gold reserve in treasury compared to other countries, would USA wants its gold collection becomes a loss?    Likely not.

5.  When people panic and sell off gold ETF and related gold mining stocks, some look at it as an opportunity to enter.  In Asia, investors are buying gold like never before as the price dropped so much on Tuesday.  Many of the Gold mining stocks are also at its all time low points.

Let us take a look of the world largest gold holding countries

  • The United States (#1) was static at 8,133.5 tonnes
  • Germany (#2) was down slightly at 3,391.3 tonnes (April 2013), versus 3,401.8 tonnes in late 2011
  • The International Monetary Fund (#3) was static at 2,814 tonnes
  • Italy (#4) was static at 2,451.8 tonnes
  • France (#5) was static at 2,435.4 tonnes
  • China (#6) was static at 1,054.1 tonnes
  • Switzerland (#7) was static at 1,040.1 tonnes
  • Russia (#8) increased reserves from 851.5 tonnes in late 2011 to 976.9 tonnes (April 2013)
  • Japan (#9) was static at 765.2 tonnes
  • The Netherlands (#10) was static at 612.5 tonnes
  • India (#11) was static at 557.7 tonnes
  • The European Central Bank (#12) was static at 502.1 tonnes
  • Taiwan (#13) was static at 423.6 tonnes
  • Portugal (#14) was static at 382.5 tonnes

Central banks buy gold to stabilize and support their currencies.  Speculators around the world may also have some effect on stabilizing gold price.  The fear of Cyprus selling gold to pay debt may be over exaggerated.  Cyprus has only 13.9 tonnes of gold to sell and currently it is not actively selling at the current price fluctuation.  Again comparing 13.9 tonnes of gold to the above list you will see it may have limited effect yet the fear always grabs investors’ heart.