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posted on 09 October 2015

Top 3 Reasons Why People Purchase Gold

For many of those who are unfamiliar with the ins and outs of the gold trading business, the mention of "gold buying" conjures up images of people collecting fine jewelry pieces and acquiring coins salvaged from old Spanish treasure hoards. But while owning jewelry and collecting ancient gold coins are popular ways of owning physical gold, some experienced gold buyers prefer buying the precious metal in the form of modern bullion bars and bullion coins.

Gold bullion bars that are held in government reserves and in central banks all over the world are usually quite large. Most weigh between 350 to 430 troy ounces as per the Good Delivery specification, a set of standards issued by the London Bullion Market Association. Privately traded bullion bars, on the other hand, are typically smaller, with the 1000-gram (32.15-troy-ounce) "kilo bar" being the most popular among buyers.

Gold bullion coins are available in even smaller weight classes, with variants typically weighing anywhere between 1/20 of a troy ounce to 1 kilogram (32.15 troy ounces). Larger varieties of gold bullion coins are available, but they are not as popular as the smaller ones, which tend to be more liquid or easier to sell.

It is important to note that in the modern world, people buy gold bullion coins and bars mainly for these three reasons:

Wealth protection

People often see gold as a commodity, but it also has characteristics that are similar to those of a currency. Gold is not commonly used on a regular basis as a way to make direct payments, but it is relatively easy for anyone to convert it to cash should the need arise.

The best thing about gold is that its value has the tendency to remain stable or even perform positively when the value of paper currencies fall. Gold can rally even when crises like wars, disasters, or recessions threaten the world's economic stability.

When there is inflation and the prices of goods and services soar, the purchasing power of gold also tends to remain secure. Paper currencies, on the other hand, lose their value. As a result, people end up buying less with the same amount of money.

Asset diversification

People also buy gold to diversify their asset portfolio. The risk of losing capital is great when you keep all your eggs in one basket, and that's why it is important to spread your wealth across different asset classes.

Diversification is also intrinsically linked to wealth protection. When some of your assets like stocks or paper currency perform poorly over a certain period, other assets like gold may perform better over the same period, allowing you to shield yourself from an across-the-board capital loss.

Gold's value

The last point is the value of gold. While the price of gold has declined since July 2011, the metal's market price of over $1,100 per ounce in September 2015 is still much higher than its February 2001 price of just a little above $355 per ounce. This reflects an outstanding long-term price performance, although you should also be aware that gold prices tend to move in cycles that can last several years. Thus, its performance over a certain period can never be guaranteed.

If you want to learn more about purchasing gold or if you want to know more about the gold bullion products available in the market, talk to a reputable dealer today. Doing all your research and looking for the right merchant whom you can trust may take a good amount of time, but if you do things right, buying gold can be a rewarding and lucrative endeavor you won't regret taking a plunge into.

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