Bright and shiny
Gold is more than just a pretty metal that people wear as jewellery – it is also a traded commodity that people, businesses and even governments invest in.
As the eZonomics story What is … influencing gold prices says, the price of gold hit a record high of US$1,896.50 per ounce on 5 September 2011. But by April 2013, it had fallen to less than US$1500, a drop of about 20%. The article also highlights a range of factors that can influence gold prices up or down – including interest rates, the strength of the US dollar and speculation from investors.
The price of gold can rapidly rise or rapidly fall and it can be difficult to predict.
Don’t put all your eggs in one basket
Investing in gold suits some people – but, as with all investing, individual circumstances will vary. Investing decisions vary from person to person but people considering putting money into gold should remember the importance of diversification across asset classes (such as shares, bonds and cash) and geographic areas. Or in other words, don't only go for gold.
Did you hear the news?
The increased media coverage of gold prices in recent weeks may raise the risk of falling into a thinking trap known as recency bias. The idea is that recent or very vivid information can influence the way we invest – and that people can overreact to the information because it is fresh in our minds.
A sudden reaction to news might be in contrast to longer term plans. Before reacting to sharp rises or sharp falls in prices, it might be a good idea for investors to assess how the decisions fit with their long term plans.