Gold Investments
There are several precious metals in the world, but somehow gold has managed to overcome all the existing ones in terms of investment value. Gold is considered the safest investment as it is not sensible to any social, economic, political or currency crises such as currency failure, burgeoning national debt, investment market declines, inflation, social unrest and war. But as any commodities market, the gold market also deals with speculations, especially when derivatives or futures contracts are involved. There are, however, many aspects which point out to gold that it’s acting more as a currency and not as much as a commodity. Such aspects include the importance the gold reserves have in central banking, the fact that the commodity prices influence very little the gold’s price, as well as the relation between the pricing of gold and the fiat currencies between 2007 and 2010 when the financial crisis took place.
Throughout history gold was used as money and currency equivalents have always been reported to gold as standard. Towards the end of the 19th century, most European countries used gold standards. This lasted up to the World War I, but was revived after the World War II when the system of Bretton Woods pegged the US Dollar to gold with a value of 35 USD for a troy ounce. This system functioned until the Nixon Shock in 1971. Starting with that year, the dollar seized to be converted directly to gold and this marked the beginning of a system of fiat currency. The Swiss Franc was the last currency which was not related directly to gold any more.
Starting with 1919 the London gold fixing was the most used benchmark to establish the gold price. Five bullion-trading firms operating on the bullion market in London would send their representatives in telephone meetings, twice a day, to establish the price of gold.