Why Gold Is The Asset Class You Should Hang Onto

Hang On To Gold

Gold has become a popular investment of late but don't let that deter you from buying or hanging on to it now. Usually when the broadsheets are covering a particular sector or asset, it's time to get out, but logic suggests it's still a good idea to hold onto gold in 2007.

Demand Likely To Increase

India gets its first ETF traded fund in March 2007 and it leads the world in its affection for physical gold. To give you an idea of the numbers, India own more then fourteen thousand tonnes of rings and bracelets. This makes up almost ten percent of the gold above the ground in the world.

Output Decreased In 2006

Supply fell by 2% in 2006. Politics and finance are restricting the speed at which gold producers can get gold out of the ground. Politically unstable and historically more unstable regions are now being targeted. Egypt has now made it a lot easier for gold producers to get on with their projects. One promising minor gold producer with proven reserves is Centamin Egypt ( CEY ) which is now working at an accelerated rate.

Every new ounce of gold discovered cost over twice as much to locate as it has in the past, on average. In an attempt to defend their share prices, companies in this sector have started to undergo mergers and acquisitions activity.

So Why Buy Gold?

At face value you may at first wonder why you should buy gold. After all it has few practical applications and it costs money to own it. However, gold can't be printed like a banknote can so it's finite in supply. It has to be mined from the ground and that's why it will always be used as a store of value. In short its attraction is its rarity value. What else can you say that about? Certainly not paper currency that's for sure. Gold is also a global currency and owning it gives you peace of mind you are holding onto a secure physical asset. If you invest in a gold company you also have operational gearing on any subsequent gold price rises.

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