Gold, the Ancient Investment

Gold is a commodity that has been sought for hundreds of years by all kinds of men and women. Why do so many people seek something that has such limited utility? The simple answer is that there isn't very much of it. It provided the earliest forms of currency simply because it was both difficult to find and easy to identify.

Counter intuitively another reason why it makes an ideal currency is because it is not very useful. While it is very conductive, ductile and malleable, because it's rare it doesn't have much use in applications. While it may conduct a tiny bit better than copper, there is much more copper available, so it makes sense to make our wires from copper.

Despite it not being used as a currency anymore, gold is still an investment for many people. The currencies of most of the modern nations are controlled by central banks. These banks enact monetary policy that essentially increases or reduces the supply of money. This oftentimes leads to inflation, where their currency becomes worth less.

By purchasing gold, investors seek to avoid that inflation. If a given currency suffers from inflation, the price of gold should appreciate as the value of the currency decreases. Thus many investors see this as an ideal way to capitalize on inflationary policy in governments.

It is also often times an investment in times of panic when people lose faith in their governments. This is rooted in a fear that the currency of their nation will either diminish in value quickly or be unavailable. Thus in times of economic instability, gold tends to be a good investment. Overall, the investing profile of gold is very complicated, but it often has a place in the modern investor's portfolio.

Vitaly Indinko writes about investing and other personal finance issues at http://worthyposts.com. Learn more about gold exchange traded funds, and other tips for making your money work for you.