What is Gold?

Gold (pronounced /ˈɡoʊld/) is a chemical element with the symbol Au (Latin: aurum, "shining dawn") and an atomic number of 79..................

As for economists, I am pretty sure that’s already too much chemistry information. In fact, let us get back to the real topic, what does gold stand for? To be honest, gold price has been increased quite a lot in the past 5 years. (Getting the reference price from a GOLD ETF, name GLD, I calculated that the gold price has increased more than 154.68% within this 5 years.) But why has gold increased that rapidly in the past few years and why in recent, every fund or even chemistry students will tell you that gold will be a good place to invest in.

Back to the basic, back to the economic, gold act as a hedge for fiat money. Not only US dollar, but also currencies that are categorized as fiat money. ( Make it simple for now, fiat money means paper money, for more details, please do some Home Work) In an economic crisis, investors are frightened and their risk appetite change. They afraid depreciation and depression, and so, they tend to invest in gold which shall be the safest place to store their purchasing power during depreciation and depression. That is the main reason why gold price has increased that many in the past.

But will this trend go forever? I do not think so. Following by the stability of the economic worldwide and steadiness of value of fiat money, the golden trend will not go forever. When the mist in US, POUND and EURO clear themselves, golden trend has to stop. No sooner or later, gold shall become back to a chemical element with a symbol of Au, and might only chemistry students know the meaning of GOLD. So be aware not to invest that heavy in gold in the coming days.

Thanks
Paul Ng