Why do people buy gold?

Gold bullion investing gets a huge amount of media attention even if only 1% of people in the West actually invest in gold.

But, why does this vocal minority of ‘gold bugs’ bother buying gold? Why would smart investors with sensible opinions buy something as ancient and potentially out-dated as gold bullion bars?

Safe haven assets out of the banking system.

Simply put, gold bullion is different from all other financial investments in that it is isolated from the financial system and its value can never go to zero. This is very different to:

– Equities: that can go to zero if the company is badly managed or has some catastrophic scandal. The likes of Lehman, Woolworths, Arthur Andersen and others actually occur far more regularly than we are lead to believe.

– Bonds: which can also go to zero if the issuer becomes insolvent. Investors at this time are participating in potentially the world’s largest ever ‘bond bubble’, partly caused by central bankers manipulating…

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