23-04-2025
Gold rush: Why are people flocking to this 'useless' commodity?
Investors have been spooked by erratic stock market changes and are putting there money into gold instead. Credit: AAP The price of gold has surged to its highest value on record amid volatile stock markets and global economic uncertainty, as investors move their money to what they hope is a "safe haven". The price of gold per ounce rose to US$3,500 ($5,477) on Tuesday, the highest value it has reached since records began. It later dropped back to around US$3,280 ($5,165). Dr Pramod Kumar Yadav, a lecturer in finance at the University of Sydney Business School, earlier told SBS News the recent stock market crashes are due to the uncertainty that economic measures like trade tariffs can create, making stock markets risky for investors. "There are also going to be people moving money from risky assets like the stock market to safer assets like cash, gold, and government bonds," he said.
Gold has historically been considered a reliable commodity for investors, immune to stock market crashes and government decisions.
Honorary professor Andrew Stoeckel, an economist from the Australian National University, told SBS News gold has no "intrinsic" economic value. "How would having a bucket of gold on a desert island help you? It would be useless, you can't eat it, you can't plant crops with it. But people like shiny stuff," he said.
Much like the stock market, which is perceived as a value rather than physical cash, there is a belief that gold is scarce and precious, which gives it a valued status in society, Stoeckel said. He likened gold to silver, saying that while they are both precious metals, silver has physical applications and uses, such as being a good conductor, which gold lacks. He said the appeal of gold over the centuries is that it is a physical, tangible object that people believe governments and institutions will continue to "honour and value".
"There have been periods of high uncertainty, and people have flocked to gold, but again, gold has no intrinsic value. Just the belief that it does," Stoeckel said. Peter Swan, a professor of finance from the University of NSW Business School, told SBS News gold, like any commodity, is based on supply and demand, and that the supply of gold is unlikely to spike. "Unless another explorer like Columbus comes across a big bucket of gold in the Americas, we're unlikely to see a change," he said.
Swan said investing in gold is no different from other forms of investment, as you still get a return for your money. "They all exist on a spectrum and have different proportions of cash or earnings in returns. Shares have a dividend yield of around 4 or 5 per cent, while investing in housing gives a lower yield of around 2 per cent," he said. "Gold has zero cash component because the expected appreciation is far higher."
There are several ways to invest in gold, including buying physical gold, such as jewellery or bullion, directly from the Royal Australian Mint. You can also buy shares in a gold exchange-traded fund, where gold is bought on behalf of shareholders.
Swan predicted the popularity of gold and its value would continue to rise. "The beauty of gold is that the supply is relatively fixed, and that's going to continue, and political and economic uncertainty are probably going to get a lot worse. So we're going to see the price of gold, I think, rise even higher," he said. "There may be a resurrection of these crazy tariff arrangements, which would kill the global economy, in which case gold, of course, would be seen as a very safe haven in such turbulent times." Finance Australia Donald Trump
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