Greetings, and thanks for coming back to part three of Investing In Gold. We’ve covered the situation it faces today regarding investor opinion and even some brief history of how it manifested as currency.
From there, we lead into its establishment as a backup for money-based systems and how especially the United States government used it as the basis for monetary exchange with its bimetallic standard. Now, we’re going to discuss what happened to change this fact and how the economy has developed as a result.
The Gold Standard
The gold standard that once backed every dollar in America was abolished in favor of a credit system. During the early 20th century, several events occurred that caused gold to be moved away from a central role in the economy’s structure.
One of the key factors in making this happen was the establishment of the Federal Reserve, which was put in place in 1913. From there, this government-based banking system issued promissory notes which are now what we use as paper money.
Fast forward with this system to 1971, when the government totally abandoned the gold standard. From here, you can see how this action established gold as a material separate from money, which removed some of its outstanding value as a product of investment. This is where today’s skepticism lies towards the nature of gold stocks, and why people have different attitudes towards it.
Knowing that gold is no longer the representation of money in America, or any other country today – how is it still an important factor?
The Value Of Gold
What does gold do for investors, and how does it work to maintain wealth and build it when it is no longer an asset that defines the value of a currency? These are the questions facing investors today, such as yourself. The basic answer to this pressing issue is that, regardless of how it is applied to money, the value of gold stays the same due to maintaining a consistent presence in terms of material. Paper currency changes based on the nature of inflation and deflation, which is a measure of its propagation.
This is an important subject to cover, but we’re out of time for now. However, it must be discussed, and investment strategies for your finances will be addressed with future entries.
Hang tight – we’ll be back next week with Investing In Gold part four, with more gold information and investment considerations!
Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 – 2009
{ 3 comments… read them below or add one }
Hi Sean,
Considering how long gold had been around; it didn’t take long for us to find a way to render it useless. So, what is the point of gold other than for its own value?
I understand now why some investors won’t touch gold at all.
I am not sure Jazz if investors won’t touch gold at all. There is a lot of heavy trading going on and has been since the economic downturn started. There seems to be a hankering to have gold when the USD is in fall or the stock market is in trouble.
It seems that the true value of gold has diminished to some extent and there is uncertainty amongst the public as to its worth.
Harry S Dent who is a very respected demographics expert says that gold and silver will lose their value in the next few years.
As gold is so questionable I don’t feel I would want to invest in it without a bit more investigation.