Contrary to popular belief, gold is a risk asset, and as such, cannot serve as a reliable store of value. It also doesn’t offer better protection from inflation than equities. That is true for the long term; however, in shorter periods, the yellow metal can be a profitable trade, specifically at times of declining real interest rates and when the economy is weak. Besides, gold, with its zero-to-negative correlation to equities, can help achieve a broad portfolio diversification, which is important, as each asset class can help mitigate different risks in times of increased economic, political, and market uncertainty.
Gold has long been regarded as a safe-haven asset, and its prices are influenced by a variety of factors. As we navigate through current economic conditions, two significant factors stand out: inflation concerns and geopolitical tensions..
Diamonds might reign supreme in the world of engagement rings, but they certainly aren’t the only gemstone option out there. If you want something different, you have plenty of choices to consider, including stones that look remarkably similar to diamonds, such as moissanite.
Dating back more than 5,000 years, when gold was first discovered – albeit usually in small quantities – attracted the eye of early man nearly everywhere. And unlike most metals, gold often appears in nature in its pure form so it need not be refined. Because the metal is very shiny and does not tarnish, is easy to work with, and carries its natural beauty forever, it has been the decorative material of choice throughout history.
As a precursor to modern casting processes, the “lost wax” method was used to create jewelry more than 3,000 years ago. That process is still broadly used in jewelry making today – and in the industry as well.
Much early organized gold mining took place in placer mines, where alluvial deposits drawn from gravel or streambeds were flowed with water. Being much heavier than the surrounding materials, gold settled to the bottom and was captured. This is the same concept that gold panners employed in later gold rushes, but on a much larger scale.
River water, thought to contain gold dust deposits, was also flowed across unshorn sheepskin around 1200 BC. The gold accumulated in the skin which was dried and shaken to separate and collect the gold dust. This is likely the genesis of the term “Golden Fleece”.
Just because it took a while for gold to be used directly as currency did not mean that it was not highly valued. Power and the presence or ownership of gold went hand in hand. Gold jewelry was found in the Tomb of Djer, a king in the first Egyptian Dynasty around 2500 BC. The tomb of Tutankhamen from the 14th century BC contained the largest found collection of gold and jewelry in the world. And Egypt’s acquisition of gold – through means peaceful and not – was a key basis of the power and influence which supported that society for centuries.
The Shekel became one of the early forms of actual currency that contained gold. Used in the Middle East from about 1500 BC, the Shekel was gold alloyed with silver. In today’s market, a Shekel would be worth about $500.
Even recently, meaning in the past 200 years, U.S. population settlement patterns, increased levels of immigration, and even cultural attitudes have been shaped by the discovery and search for gold. The desire to “get rich quick” has shaped many lives.
Millennia after its discovery, much about gold has not changed, and the human fascination with the lustrous metal is still very much alive.
