The FINANCIAL — The Euro and the Dollar are changing their rates against GEL.
It impacts on the population’s budget significantly as most Georgian citizen's deposits are kept either in USD or EUR accounts in Georga.
The Euro and U.S dollar rates have been continuously varying since 2010. Therefore, the people with Georgian accounts are in a precarious situation. They cannot confidently decide which currency is reliable, which currency is beneficial for saving money and which currency will not reduce its value.
In such a situation economic experts' advice is to invest in shares of gold. “The price of gold is increasing in relation to the dollar, the Euro and Gel. Therefore, investing in gold is the only way to ensure the safety of your money and to potentially increase it,” saidPaata Sheshelidze, the economic expert. “Gold is a natural metal and its availability is limited and the production of certain currencies depends on political decisions. Therefore, gold is much more stable and reliable than the US dollar, Euro or Gel,” he added.
Each article on financial news states that gold stocks are raising, all the way to 1,800 USD per ounce in August, 2010. Major banks are predicting gold shares will rise to 2,500 USD per ounce this year, while experts are suggesting it might reach even higher values.
Gold shares are already climbing by 50 USD per day. In fact, a 100 USD increase in one day isn’t unheard of. Gold prices have soared from 1,500 USD to 1,800 USD per ounce.
The price of gold depends on the purity of it. Pure gold is defined as 24 karat. Gold with less karats means gold which is less pure. The following are the prices of gold after the recent price increase: the 24k gold sells for about 1,422 USD per troy ounce, or about 45.72 USD per gram. However, 14k gold sells for about 830 USD per ounce or about 26.65 USD per gram.
Besides global currency debasement, the rising level of investment is another reason to invest in gold. With the current recognition of the instability of many currencies, an enormous investment demand for gold will arise in the near future as it is already proving to be increasing in popularity.
In fact, China with its 1.3 billion population established the National Gold Exchange and relaxed its control over the asset. In the next few years, the demand is expected to rise in China to reach about 500 tons.
Gold and silver are the only investments that aren’t created and controlled by governments. All of today’s monetary currencies – US dollars, Euros, Yen, Pounds, etc –are only worth something due to government decree. “Gold is money itself. We have to restore the use of the free market, of gold. This is important as it will prevent politicians from being able to manipulate money for their own interests. The main priority for people should be to protect themselves from irresponsible political decisions. This risk is fully protected by gold,” said Paata Sheshelidze.
Another reason is that gold, unlike monetary currencies, is currently gaining credence. Investing money in gold is known as a “safe haven”. Investing in gold is a proven method of preserving the value of one’s shares when a national currency is losing value.
All that is very attractive, but some experts believe it’s not advisable to invest in gold. With the exception of last 5 years, gold stocks haven’t done well in the past.
The ex-president of the National Bank of Georgia, Nodar Javakhishvili, says that it’s better to make money in circulation than to invest. “When you invest money in something and therefore don’t make any turnover on it is the worst possible decision. Money should bring profit. Financial companies buy stocks and sell them periodically. Sometimes, you have to buy stocks in morning and sell them in evening. However, if you want a long-term investment then gold is profitable because, after a significant period of time, gold prices eventually increase and you gain a profit. But this profit won’t be higher than the profit that can be made from money invested in businesses,” said Javakhishvili. He also warns the people that when they’re advised to invest in gold, they need to first decide whether it is reliable or not: because if I tell you to invest in gold, it probably means that I want to raise the price of gold to make a profit myself. Then I would increase the demand on it,” Javakhishvili added.
There are several methods of gold investments: gold coins and gold bullion, jewelry items, artificial teeth and so on.
Experts say that investing in jewellery items isn’t actually that profitable because their prices have been increasing and they include not only the price of gold, but also the cost of labour. Investing in gold coins is better as it doesn’t require any extra tax for labour costs, however this still isn’t that profitable. This is because banks buy gold coins at the price of metal, which is quite low in comparison with its initial price. Nodar Javakhishvili, however, says the opposite: “If you understand art, it’s better to invest in jewellery. It’s true, when you buy gold it does include the price of labour but don’t forget that the same labour price is included when you sell it. Moreover, because of the ware, the price should be raised.”
“Incorporating the price of gold is not only determined by the ware. It is also important to take into consideration the artistic value too. Jewellery items are being frequently sold and their prices are increasing as well,” added Sheshelidze.
Gold is fungible, liquid, portable and accepted anywhere in the world. Moreover, it is under-valued, under-owned and under-appreciated. It is most certainly not well understood by most investors. At the beginning of the 1970's when gold was about to undertake its historic market shift from 35 USD to 800 USD per ounce in the succeeding ten years, the same observations would have been valid. The only difference this time is that the modern features of gold are actually better.
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