Many people know of the common stock trading that happens daily. A person can purchase shares of any public company from Tesla to Ferrari, Amazon to Target, or Apple to Microsoft. I think you get my point. But, did you know that you can purchase gold? This is not like a gold necklace. The gold you purchase are “shares” of gold through NASDAQ or Dow Jones. So, when you purchase a share of a company like Amazon, you are really buying a security (common stock) of that company. However, when purchasing gold, you are purchasing troy ounces instead. Gold is a commodity, that means you are able to have ownership of the gold traded around the world. Silver and platinum are also traded in troy ounces. Commodities can range from oil, natural gas, gold, silver, copper, wheat, coffee, and many more. They are separate than securities, because commodities are a completely different market. Now with an established understanding of gold, and how gold is traded, let’s get into the commodities market.
The US stock market is currently in shambles. This is due to many factors from the current oil crisis to China’s stock market crashing. This is not the article to explain that. Besides a few stocks performing well, everything else is in the red, badly. This is a time where many people are panicking about losing thousands of dollars. Idealistically, an investor should only use money in the market that is there to be lost, don’t put your retirement fund into the market. Unless…you invested in gold. Gold seems to always do well when the market is failing. There is always a need for gold in the modern market so there are no overproduction worries. Gold is the fallback when a currency may fail, like the US dollar or Chinese Yen. Gold is beneficial when the market crashes because there is only a limited amount of gold. So, when prices inflate, gold is no exception making the commodity do extremely well. When things go bad, turn to gold.
Now, every tradable item on the market has a weakness. There is no superman of stocks, every stock has some sort of kryptonite. Gold is not a commodity to invest in and hold on for a long period of time. When gold crashes, it crashes hard. This usually happens in a deflated economy. A deflated economy occurs when the general price of goods decreases below a 0% inflation rate. When prices of items are dropping, the price of gold will naturally drop because it is a commodity. This means gold will not have beneficial outcomes for an investor necessarily. Right now, the economy is deflating. You may say, “But Mike, gold is rising as you write this.” Yes, gold is rising, but the economy is deflating. Gold is currently enjoying its bubble created by the oil crisis. Oil being traded on the market has decreased immensely, yet gold seems to surge its way through. That is until it’s gold’s turn to deflate. There are no signs of inflation in the near future, which puts gold in the hot-seat. Gold is only safe in an inflating economy. If prices on commodities raise, so will gold. That means when commodity prices decrease, gold will too. When will gold crash? It is only a matter of time.
Graph of Gold over the year
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