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Is Gold XAU worth investing?

 

What is gold?
“Gold is a chemical element with the symbol Au and atomic number 79. It is a dense, soft, malleable and ductile metal with a bright yellow color and luster, the properties of which remain without tarnishing when exposed to air or water. Chemically, gold is a transition metal and a group 11 element. It is one of the least reactive chemical elements, and is solid under standard conditions. The metal therefore occurs often in free elemental (native) form, as nuggets or grains, in rocks, in veins and in alluvial deposits. Less commonly, it occurs in minerals as gold compounds, such as with tellurium as calaverite, sylvanite, or krennerite.” Quoted from http://en.wikipedia.org/wiki/Gold

Value?
The value of gold come from historical value. Humanity had being using Gold for trading since 600 BC and we have being using Gold for trading for at least 2000 years before we abandon the “Gold Standard” during War World I and War World II. With current economic, gold is use as a form of investment.

A piece of Gold does not have a profit and lost like a company, it does not duplicate itself, and it is not editable. It does not have value other than the value that we give it, and this is important as this is the main reason why Gold fall and rise.

Gold usually rise during war time and hyperinflation when people fear that their currency would no longer have any value, but usually the rise would be quite limited and most of the buying/selling occur in other countries and not the one that is being affected. It will be hard for the war torn country to get their hand on gold as their currency would be deem as too risky and also their abilities for import/export would be greatly reduce due to the unrest in their country.

The black market in the affected country would usually prefer something more liquid like USD which have an international market or neighbouring countries where their currencies is more stable. Sometime alternative method of trading would take over the official currency for example bartering in which common items like guns can be exchanged for food.

Liquidity?
The liquidity of physical Gold depend on the countries as each countries have their own system of trading Gold. But it will be hard for someone to use Gold as a form of currency and just directly exchange Gold for goods or services.

In term of Liquidity, the paper Gold trade (ETF) is the same as stocks or other form of paper trades.

For physical Gold, normally banks or Gold shop would gladly buy gold off the seller but at much lower rate than the market spot price.

Growth?
Limited to fear, but not much use during real crisis. Would you exchange your limited ration for a piece of gold? You did? Now your family is starving…

Does it make good investment?
To me, Gold is not a good investment as it does not produce value, it is non editable and it does not duplicate itself. If you want better form of investment that will really help in a crisis time, you will be better off owning a bunch fruit trees, they are cheaper too.

Even Warren Buffet think gold is stupid

"(Gold) 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." Quoted from http://slant.investorplace.com/2013/04/warren-buffett-thinks-gold-investing-is-stupid
 
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