Why you need to understand the world of gold

Though we're no longer on the gold standard, and despite periodic suggestions by a few economists that we should return being considered almost "crackpot," it's still important for anyone who has more than a few dollars invested to understand the value of gold.

The term "gold standard" is still used in marketing to describe the best available product or idea, and it's for good reason.

In the economy of early 2009, we see that the U.S. dollar is continuing to decline when measured against other currencies. On the other hand, we see the value of gold continuing to appreciate, having hit $1,000 early in the year before settling back in a range above $900. But it hasn't been too long since the price was far less than this.

There are probably no metals more recycled than gold. Gold once possessed by King Solomon or King Midas may well form part of the wedding ring you're wearing today.

Gold is eternal; it is virtually impossible to destroy and it is too valuable for much of it to be lost.

In the 2009 commodities industry, gold is just about the only commodity that is holding its own. Base metals, including copper, zinc, aluminum and even iron ore, have fallen dramatically in price in the past year. Other precious metals, including platinum and silver, have fallen far from their year-ago peaks.

Gold continues to appreciate

Yet gold continues to march ahead. Virtually any gold mine in the world that can be operated is running at capacity. New projects are on the drawing board. Why? Because demand is running so far ahead of supply. Only when this happens does the price move up this markedly.

Combine this with the fact that because gold was mined extensively during the recent "good times" in the world's economy used up the resources of many major mines, and you'll see why there is so much demand.

Many instruments of investment today are non-tangible. While you can walk around a home or other building you own (and cry as you watch their values fall), you don't see stocks and bonds and futures contracts and 401Ks and the like. Gold you can hold in your hand.

Just as many people prefer a physical book to an e-book, many also like to be able to feel their investments. And if this is true in the industrialized West, how much more true is it in the developing economies, such as Brazil, Russia, India and China.

As those nations develop much larger middle classes, they compete for access to tangible wealth, especially gold, and that drives up the price.

If you're going to consider gold as part of your investments, do yourself a favor and learn as much as possible about it: its history, its uses (other than as an investment, and yes, there are many), its mythology and the forms in which gold investments can be made. Only then can you feel comfortable about putting part of your wealth into gold.

Learn about treasure hunting, gold prospecting, metal detecting and exploration.