make. Currencies come and go even the U.S. dollar would probably be worthless someday

in the future, but gold has never lost its value through millenniums.

Gold is used in a wide range of industries. Some make jewelry out of it; others use it

in the manufacturing of certain electronic and medical devices. And others invest in

it like you probably, since you are watching this video.

As of April 2020, the price of the gold is $1657, significantly higher than it was let's

say 50 years ago ($300).

But the question is, is gold a good investment? Or to be more precise, has gold been a good

investment? Well, the answer isn't really that simple.

Since the abundance of the gold standard, the world has been overwhelmed with paper

currencies. It is even difficult to imagine a world where gold is a currency.

But it has been once upon a time not that long ago. However, the modern financial system

is so complex that we can no longer go back to the gold standard.

But what we want to explore in this video

is, If you have some extra cash in your piggy bank, should buy gold instead of stocks or

even real estate. But Before we answer that question, we have

to understand what drives the price of the gold first.

So, Besides having a unique and beautiful color, unlike other elements. Gold has always

been the most trusted currency. Gold has always been used as a way to pass wealth from one

generation to another to preserve their wealth. Because unlike gold, paper currency has always

been quite worthless in the long run, but gold has maintained its value throughout the

ages.

The U.S. dollar has been the most important currency for the last hundred years. Even

today, countries all across the world have stacks of U.S. dollars in case of emergencies.

But even the U.S. dollar isn't a safe heaven because the value of the dollar falls based

on the actions of the FED and the government.  During the margate crises, the economy was

in a deep hole, and the only way the government could save the economy was by injecting trillions

of dollars into the economy to keep the dice rolling again. But that pushed the investors

to buy more gold and doubled the price of the gold in just four years (2008-2012). In

fact, prior to that, between 1998 to 2008, gold prices have tripled.

Historically speaking, gold has proven itself to be an excellent asset against inflation

since its price rises together with the cost of living. In fact, whenever inflation significantly

rises, the price of gold simply soars. And with the modern financial system, financial

crises happen quite often.

But a financial crisis means chaos, and that means uncertainty. When it's not clear where

the economy is headed, people want to feel that their wealth is safe, and that's why

they turn to gold. During any crisis, gold often becomes the safe heaven that investors

look up to. Since, they are confident that, no matter what happens, gold is going to keep

its value.

Even when there is a deflation, when prices are decreasing as it was during the great

depression, gold prices rise.

But that's not all, whenever the public loses confidence in governments, they also tend

to turn their reserves into gold quickly. Because political instabilities can lead to

chaos and financial crises. Gold prices, for instance, grew during this Brexit deal. When

world tensions rise, gold prices usually outperform all other investments.

But one can argue, with all the technological

advancement we have today, what is stopping us from miming more gold and a huge supply

would drive the price down.  Well, even with modern technology, it's

not easy to extract gold. Gold mining production has not changed significantly

since 2016. And the main reason for that is, "easy gold" has already been mined; miners

now have to dig deeper to access quality gold reserves. And that is much more challenging

and raises many other problems. Miners are exposed to additional hazards, and the environmental

impact is heightened. In other words, it costs more to get less gold. All these factors add

to the costs of gold mine production and making it less attractive to investors.

Major suppliers of gold in the market since the 1990s have been the central banks, such

as the FED, since Central banks keep gold as one of their significant reserves.

But since the crash of 2008, even the central banks significantly stopped selling their

gold reserves. At the same time, the production of new gold from mines had been declining

since 2000. And bringing a new mine into production can take up to a decade.

Which all led to the rise of gold prices. The demand for gold might decline temporarily

from time to time, but it always rises back because Golden jewelry is part of many cultures,

which means that there will always be a demand even when investors turn to other forms of

investments.

But that hasn't always been the case. Once

upon a time, not that long ago, gold was the international currency of the world and wasn't

only used in the manufacturing of jewelry. I know that its difficult to comprehend that

just a hundred years ago, people actually used gold as a currency.

To understand how did we entirely moved out from gold and are completely depending on

fiat currency. We have to take a look at the history.

For over 5000 years, gold with its scarcity and beauty has captivated humankind like no

other metal.

For the first time, gold was used as solid coins around 700 BC. Before that, gold had

to be weighed and checked for purity when settling trades.

But these coins were not without their problems. They have been used in different shapes throughout

centuries.   However, the biggest obstacle was that gold

was simply too scarce, and digging it from the ground was much more difficult given the

technology they had in the past.

To understand how scarce was gold back then. In the 16the century, Spain extracted so much

gold from the New world that it raised Europe's supply of gold by five times.

Of course, paper money was gaining some popularity back then, but gold was still the main instrument

of the monetary system.

But as the world economy started to rely on debt more and more, paper money slowly began

to dominate world economies, but it had its fair share of problems. So the world came

together to create the gold standard at the end of the 19th century (1871).

It actually worked pretty well, inflation was at around 0 percent, and the world found

a common language to trade until the world decided to destroy each and started world

war 1. Even though the gold standard did not collapse, political alliances changed; governments

began to run out of gold, and national debts soared, which pushed the world to move to

something more flexible to base on, the world economy. Especially since gold supplies continued

to fall behind the growth of the global economy, which ended in a few nations holding most

of the gold reserves such as the United States and Britain.

The great depression (1929) made it only worst. War debts forced many countries to abandon

the gold standard. Even England had to get out by 1931.

and guess what happened after WW2, the U.S. had 75% of the world's monetary gold, and

the dollar was the only currency still backed directly by gold. But as other nations began

to rebuild their economies, gold slowly began to leave the United States, especially with

the war in Vietnam. The U.S. Went into a deficit and was afraid that it would run out of gold.

Countries like Belgium cashed in dollars for gold, and many others were intending to do

the same, which pushed the united states to completely abandon the gold standard in 1971,

which was the end of the gold standard. The truth is, although gold has always played

some role of currency for thousands of years. A true international gold standard existed

for around 50 years (1871 to 1914).  And today, the price of the gold is determined

by the factors we have discussed earlier. However, the main question remains, Has Gold

Been a Good Investment?

Well, the answer is both yes, and now, it highly depends on the time frame. Sometimes

it outperformed other investments, and other times investing in stocks or bonds would have

been a much better option. Gold might be a solid investment, but its definitely not the

best all the time.  If we take a look at the last 15 years, yes,

gold (%278 increase) did actually better than the stock market ( 173%), but if we take a

longer time frame such as 30 years, then the stock market has significantly outperformed

gold. The Dow Jones industrial average has gained ( 839%) while gold only (280%). Even

returns from corporate bonds ($450) have been higher than gold.

However, if we take even a longer time frame, such as since the abundance of the gold standard

( 1971), gold (4,500%) has outperformed the stock market ( 3,221%) by a reasonable range.

Are they going to be a good investment during this crisis, well, its impossible to say,

maybe it might be, maybe not. Only time

will tell.