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Gold - the Standard and the Investment

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Essay title: Gold - the Standard and the Investment

Introduction

Gold has served as medium of exchange and a store of value since the days of the pharaohs, dating back nearly 5000 years. Gold coins were used by the Greeks and the Romans; this tradition passed on to the mercantile era into the nineteenth century where the great increase in trade led to a need for a formalized system of settling international trade balances. Thus, the “Gold Standard” was born.

Since the end of the Gold Standard in 1971, Governments have been free to print as much money as they please. In recessionary times, as the US is currently experiencing today, the return on bonds, equities and real estate is not adequately compensating investors for risk causing the demand for gold (and other commodities) to sky rocket. Following the rules dictated by supply and demand, gold has recently reached a record high of over $1000 per ounce.

It has been adopted as a standard of money, as a role in society’s customs, a preserver of value, a portfolio diversifier, a currency reserve and part of many industrial applications. In recent times, gold has served well as a hedge from falling equities – balancing out one’s portfolio reducing the risk in case of an economic slowdown. This holds true today and is a perfect reason why gold is and has been such a good investment choice.

The Gold Standard: Pre-WWI

The Gold Standard was a domestic standard, regulating the quantity and growth rate of a country's money supply. Since new production of gold would only add

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