As you know, gold is one of the more precious chemical elements that is found in nature. Having been mined for the past few thousand years, mankind has certainly managed to acquire vast quantities of this precious metal. It is hard to know exactly how much gold has ever been mined due to the fact that it has been mined for thousands of years and that there are no records. One estimate however, is that there has been a total of 171,000 Tonnes of gold mined altogether. Whilst this may seem a huge number, it really isn't when you consider how long humankind has been mining gold.

Famous investor Warren Buffett is quoted to have said that if all the gold in the world were to be melted down and formed into a cube it would be only 20m² in size. If you add this to the fact that gold is a finite resource and that only a certain amount can be mined in a year, then gold becomes an increasingly more attractive investment prospect. At currently around $41,775 (£33,500) a kilo though, gold investment does not come at a cheap price.

Top 10 Countries Gold Reserves (2015)

Country
Gold Reserves (Tonnes)

United States of America
8133.5
Germany
3384.2
IMF (International Monetary Fund)
2814.0
Italy
2451.8
France
2435.4
Russia
1206.8
China
1054.1
Switzerland
1040.0
Japan
765.2
Netherlands
612.5

Who Buys Gold?

Whilst gold is praised for its rarity and often seen as a collectors item, it in fact has so many more uses. It is used for example in the technology industry on circuit boards as a conductor. According to the World Gold council, a typical cell phone may contain 50 mg of gold, worth about 50 cents. Given the fact that nearly 1 billion cell phones are produced a year then you will see that the gold industry equates to nearly $500 million in phones alone. This is not taking into account other technologies with circuit boards such as computers and cameras.

Traditionally it was also used as a currency as well. However, nowadays it is more common for a country to use their gold reserves as a backing for their currency and not as a form of currency in themselves.

Gold Prices Over The Last 10 Years (USD)

If you are to look at the gold price over the last 10 years you will see that there has been significant increases in the overall cost. This is in part due to the worldwide financial crisis of 2008 which saw the fall of major banks such as Lehman Brothers. In times of crisis it is common for investors to find a safe haven in gold.

The price in 2005 was around $14 per gram for pure gold. As of November 2016 this price is $42 per gram. This is a 300% increase in price over this 10 year period. If I bought 100 grams in 2005 I would have a $2800 increase in investment now. Whilst this does not guarantee future growth, it makes gold look like a good long term investment. If you are looking for a 10year+ investment then gold could work out well for you.

Why Should You Buy Gold Now?

With increased financial insecurity within the Eurozone and slowing growth in China, it seems to me that gold prices certainly aren't going to be falling massively in the next few years. You also have to remember that gold is a finite resource and that a certain amount can only be mined in one year. There is however, increasing demand for gold from developing nations who are developing larger middle classes. An example where this might be seen is India. The last 15 years has seen a telecommunications and technology boom in India increasing the size of the Indian middle class. This has created an increasing demand for gold and other expensive luxuries. This is perhaps another reason why I believe that the gold prices will not be falling anytime soon.

As with any investment you obviously have the risk of the value of it falling in price as well as gaining. However, gold differs from many other investments because it is a physical object and its value is intrinsic.

Should You Buy Gold Bars Or Coins?

Once you have decided that you would like to invest in gold, the next challenge is which form you should you buy it in. For most serious investors, the main two ways are Gold Bars or Gold Coins. Jewelry is obviously another good way to buy gold but most larger investors would steer clear of this.

In truth it does not matter whether you buy gold bars or coins. Traditionally sovereigns and other coins were the main form of investment into gold. Smaller investors may want to look into buying coins.