Buying and selling gold bars and commodities

Historical value preservation
Unlike securities, real estate, currency, stocks and other assets, gold has retained its value through the generations. Many look to gold as a way to carry over and preserve their wealth from one generation to the next

A challenged U. S. Dollar
During periods when the dollar is weak and falls against other currencies, investors flock around the safety of gold, which means that the gold price rises. The price of gold was thus between 1998 and 2008 nearly tripled, reaching the $ 1,000 per. ounce milestone in early 2008. The decline in the U.S. dollar happened for various reasons, including its large budget and trade deficits and a large increase in money supply

Inflation
Gold has historically been an excellent hedge against inflation because the price tends to rise when the cost of living increases. Since the Second World War the five years where the U.S. inflation rate was highest was in 1946, 1974, 1975, 1979 and 1980. In these five years, the average real return on the Dow Jones Industrial Average -12.33%, compared to 130.4% for gold

Deflation
Deflation, a period when prices fall, economic activity decreases and the economy is burdened by excessive debt, has not been seen worldwide since the great depression of the 1930s. During that time, the relative purchasing power of gold increased , while other prices fell sharply. If we due to the current credit crisis will experience a period of deflation is not yet clear, but gold can in that case turn out to be a good hedge

Geopolitical uncertainty
Gold tends to retain its value, not only in times of economic uncertainty, but also in times of geopolitical uncertainty. Gold is often called "the crisis commodity" because people are fleeing to the relative safety when world tensions increase. In such times, gold is often more effective than other investments. For example, gold prices have seen some of their biggest recent movements in periods of tension with Iran and Iraq in 2007 and 2008. The price rises are often seen when confidence in government is low

The supply question
Much of the supply of gold in the market since the 1990s has come from sales by the central banks' gold deposits. These sales from central banks has slowed significantly in 2008

Meanwhile, production from gold mining has been declining since 2000. According to BullionVault.com, the annual production from gold mining declined from 2,573 tonnes in 2000 to 2,444 tonnes in 2007. It can take from five to 10 years to bring a new mine into production. The total supply of gold has been falling, which may be expected to get prices to rise

Increasing demand
The increased prosperity in the new emerging markets has increased private demand for gold. In many of these countries, gold is an integral part of culture. India is one of the largest gold consuming nations in the world, and gold has many uses, including jewelry. Thus, the Indian wedding season in October is traditionally the time of the year, which sees the largest global demand for gold. In China, where gold bars are a traditional form of savings, the demand for gold in recent years has also been growing rapidly

Demand for gold has also increased among investors, where many are starting to see commodities, especially gold, as an attractive investment class

Diversification of the investment portfolio
The key to diversification is to find investments that are not closely correlated. Gold has historically had a negative correlation to stocks and other financial instruments. To achieve good risk diversification it can be an advantage to combine gold with investments in shares, bonds and commodities in a portfolio to reduce the overall volatility and risk.