Capturing Market Trends with Insightful Analysis
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The many reasons people invest in gold
Whether regarded as a commodity, monetary asset, or simple investment, gold shines in any investor’s portfolio.
Interested in learning more about gold companies?
See what investors are saying on the Stockhouse bullboards.
Stockhouse is the leading source of authoritative breaking stock market news for self-directed investors. Our team of markets reporters, editors and technologists cover the entire listed company universe in Canada. We cover over 3,985 businesses, their people, their investors and their customers. We write the stories that move Canadian capital markets. Along with Thematic Insights, Stockhouse reaches almost 2 million of the world’s most affluent and engaged investors each and every month. With an investor database of almost 600,000 subscribers and over 50 million monthly page impressions, Stockhouse is one of the fastest-growing business and finance platforms in the world.
Stockhouse's Thematic Investor Insights reports are a new way for investors to gain insight into global markets. With in-depth compelling research and data, Thematic Insights gives investors the big picture and provides context to the companies they are investing in.
The information in this report is for general use only and is not financial advice. This report does not take into account your personal financial situation or objectives. You should consult a qualified financial professional before making any investment. This report includes companies that have sponsored some parts of the report. All brands and trademarks included in this report remain the property of their owners.
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OVERVIEW
Keep in mind that the supply of gold is effectively flat.
The total supply of gold increases over time by roughly the same rate as the human population. Put in different terms, on a per capita basis, the supply of gold has remained flat over the very long term.
With increasing demand for gold on several fronts and flat supply, this must impact the gold price – and likely sooner rather than later.
For these reasons, Thematic Investor Insights is assigning the gold sector a letter grade of “A” as a current investment opportunity. As always, investors are advised to do their own due diligence.
Since that time, the price of gold surged more than 10 per cent in 2023, touching a new all-time high above US$2,100.
Today, the price of gold is trading at US$2,018 per ounce, Thematic Investor Insights is once again taking a favourable outlook towards the gold market and encouraging investors to do their due diligence here.
Why?
Different investors (and different analysts) could supply a variety of reasons. Which is the “best” reason to invest in gold depends, in large part, on one’s own perspective as an investor.
In this edition of Thematic Investor Insights, we supply three of the best reasons why investors should consider adding gold to their portfolio.
- Gold as a commodity
- Gold as a monetary asset
- Gold as an investment
In some respects, these reasons overlap.
Why is gold the supreme monetary asset in the global monetary system (ranked above even the U.S. dollar)? Because gold is “the best money.”
To understand why this is true, we need to understand the definition of money (as opposed to mere currency, such as U.S. dollars). With some slight semantic variations, these are the four principal traits of sound money.
- Rare and/or precious
- Uniform
- Evenly divisible
- A store of value
To have value as money, the commodity being used must be rare, or precious, or preferably both.
That commodity must be uniform in quality, so each unit of currency has the same value. For example, gemstones are rare and precious. But each stone is essentially unique. Thus, gemstones fail as a basis for good money because of their lack of uniformity.
Good money must also be evenly divisible: each unit of currency must be an identical measure of that commodity.
Lastly, and most importantly, good money must be a store of value. Money (as opposed to currency) preserves the wealth of the holder.
Why has gold been regarded as the best form of money on the planet for thousands of years (with silver as a close second)? Because no other commodity satisfies the requirements for good money as well as gold does.
The obvious illustration between good money (gold) and mere currency is to compare the value of gold and the U.S. dollar over time.
Since the Nixon administration “closed the gold window” in 1971 and the U.S. dollar was no longer backed by gold, it has lost 98 per cent of its value versus gold.
Conversely, gold as money preserves the wealth of the holder.
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By Jeff Nielson, Business writer and analyst
March 4, 2024 | 4 minute read
THANK YOU
To our sponsor
When Thematic Investor Insights last looked at the gold sector, in August 2023 with the price of gold at approximately US$1,900 per ounce, this was our conclusion.
In ancient Rome, with a 1oz gold coin a gentleman could be attired in the finest garments of that era: a hand-made toga of the highest quality, along with a leather belt and sandals.
Ancient Rome
Renaissance
Today
In the Renaissance, with a 1 oz gold coin a gentleman could purchase a tailor-made suit and accessories.
Today, with (the value of) a 1 oz gold coin a gentleman can purchase a fine suit and accessories. However, because the price of gold is temporarily undervalued, he’d have to buy “off the rack.”
For the women in our audience, comparisons with female clothing don’t work here – because women’s fashion has become increasingly extravagant in terms of exotic materials as well as much more time and effort devoted to design.
The example above illustrates 2,000 years of perfect wealth preservation with gold, while the U.S. dollar has lost 98 per cent of its value in a little more than 50 years. The best money versus the best currency? It’s no competition.
For investors looking to add leverage to their gold investing, there are gold mining stocks.
We won’t be devoting a feature article to gold mining stocks in this edition (as we did last time). But suffice it to say that gold mining stocks offer at least as much value at the beginning of 2024 as they did in the middle of 2023.
The price of gold was US$35 per ounce in 1971. It was approximately US$275 per ounce in 2000. It’s US$2,000+ per ounce today.
It’s always a safe bet to predict the price of gold will rise (over time). In this edition of Thematic Investor Insights, we seek to explain to investors why this is true.
Continue reading ... Chapter One | Gold: The eternal commodity
Thematic Insights – Listen to the report: The many reasons people invest in gold