The second reason is because gold as of Gold Dinar has undeniable potential as precious commodity. For 5000 years of human experience, gold has never fail to perform its duty (Vadillo, 2002). Gold is a commodity and the material that built it, is considered very valuable to human because of its charm, chemical and physical features. Gold is malleable making it one of the most easy-to-work-with metallic elements. This ability enable human to objectify beauty in arts and decoration as it can be formed into the most intricate designs. Anything that is gold will be redeemed precious.
However apart from its charm, chemical features, physical features, portability and exclusivity, the most important feature is because gold has real intrinsic value unlike fiat money or paper money that is only printed by the power of an issuing authority (Meera, 2002). Paper money has no real value, it is just paper by right and therefore only worth as much as the paper itself if without government’s backing. Its value comes with political power and legal financial system and if they crumble, so will the money too. Paper money always has been a subject to inflation because it is printed and can be manipulated by banks of the world (government also has its own bank). In order to generate maximum profit, private banks can issue credit services, loans will be subjected to high interest rates, to cope with that manufacturers will charge more to the customers, resulting in a price hike on the consumers’ goods. Money loses value as the same RM 100 can no longer buy the same goods as before the inflation.
The effect of inflation on gold could be seen in the soaring price of gold with comparison to currency. When money devalued as in inflation, it means that the same amount of money could not buy the same amount of goods, because the money has less value over the goods. But the goods are the same, the value does not decrease, it is a real value. Gold too has real value, over the time as we see it, gold price will increase. As an example, the price of gold per ounce by Bank Negara for 9 February 2006 was RM2200, and in 9 February 2011 it was RM4387 (Kijang Emas Prices, 2011).
Besides that gold is also a great value-preserver (Meera, 2002). Gold or Aurum is an inert material that will not oxidized in air or water. Because of its good resistance to oxidative corrosion, gold will likely to last for centuries without any depreciation of its value. Pharaoh’s gold treasures 1500 years before centuries still captivating and deemed precious nowadays as it was back then. Our investment will not degrade by itself because of this reason, we could expect our wealth to be inherited and transported back and forth without getting major reductions. We may see the price of gold fluctuates in a short period of time but for a long time investment it is well worth it. Printing will fade, paper will decay, land will erode, livestock will die but gold will remain as it is.
Due the outstanding features of gold, it is not weird if it is a fact that gold being demanded by everyone and thus making it having a universal acceptance (Meera, 2002). Gold by substance is universal and identical everywhere. It is not like petroleum which occurs to be different according to the place it was discovered. The differences in grade enable trading for different quality of petroleum grades possible. The different compositions of mineral that exist underground and the process of the key substances in petroleum have undergone making it different naturally. However gold is a single substance, its chemical features make it uniform. Although foreign substance can be introduced into the gold to make it less pure, the process does not involve a chemical combination of atom into another element.
The process can always be reversed in order to acquire the highest achievable percentage of purity, 999.99. This gives gold a guaranteed acceptance by everyone or by every country. Unlike paper money which has different exchange rate between them (Meera, 2002) which make it difficult for different nationals when they need to buy goods from other countries. The exchange rates also make it ridiculously overvalued or undervalued. If we were to bring some amount of money in a vacation, what obvious reasons to justify that to have the same type of pizza in Japan would cost us around RM 110? When something is craved by every one of all races and continents, they will share the same appreciation and respect for it. The acceptances become universal and their demand is high. Therefore it is great to have gold in our saving because our wealth will be as useful anywhere on the globe. All of these qualities make gold has undeniable potential as precious commodity.
However apart from its charm, chemical features, physical features, portability and exclusivity, the most important feature is because gold has real intrinsic value unlike fiat money or paper money that is only printed by the power of an issuing authority (Meera, 2002). Paper money has no real value, it is just paper by right and therefore only worth as much as the paper itself if without government’s backing. Its value comes with political power and legal financial system and if they crumble, so will the money too. Paper money always has been a subject to inflation because it is printed and can be manipulated by banks of the world (government also has its own bank). In order to generate maximum profit, private banks can issue credit services, loans will be subjected to high interest rates, to cope with that manufacturers will charge more to the customers, resulting in a price hike on the consumers’ goods. Money loses value as the same RM 100 can no longer buy the same goods as before the inflation.
The effect of inflation on gold could be seen in the soaring price of gold with comparison to currency. When money devalued as in inflation, it means that the same amount of money could not buy the same amount of goods, because the money has less value over the goods. But the goods are the same, the value does not decrease, it is a real value. Gold too has real value, over the time as we see it, gold price will increase. As an example, the price of gold per ounce by Bank Negara for 9 February 2006 was RM2200, and in 9 February 2011 it was RM4387 (Kijang Emas Prices, 2011).
Besides that gold is also a great value-preserver (Meera, 2002). Gold or Aurum is an inert material that will not oxidized in air or water. Because of its good resistance to oxidative corrosion, gold will likely to last for centuries without any depreciation of its value. Pharaoh’s gold treasures 1500 years before centuries still captivating and deemed precious nowadays as it was back then. Our investment will not degrade by itself because of this reason, we could expect our wealth to be inherited and transported back and forth without getting major reductions. We may see the price of gold fluctuates in a short period of time but for a long time investment it is well worth it. Printing will fade, paper will decay, land will erode, livestock will die but gold will remain as it is.
Due the outstanding features of gold, it is not weird if it is a fact that gold being demanded by everyone and thus making it having a universal acceptance (Meera, 2002). Gold by substance is universal and identical everywhere. It is not like petroleum which occurs to be different according to the place it was discovered. The differences in grade enable trading for different quality of petroleum grades possible. The different compositions of mineral that exist underground and the process of the key substances in petroleum have undergone making it different naturally. However gold is a single substance, its chemical features make it uniform. Although foreign substance can be introduced into the gold to make it less pure, the process does not involve a chemical combination of atom into another element.
The process can always be reversed in order to acquire the highest achievable percentage of purity, 999.99. This gives gold a guaranteed acceptance by everyone or by every country. Unlike paper money which has different exchange rate between them (Meera, 2002) which make it difficult for different nationals when they need to buy goods from other countries. The exchange rates also make it ridiculously overvalued or undervalued. If we were to bring some amount of money in a vacation, what obvious reasons to justify that to have the same type of pizza in Japan would cost us around RM 110? When something is craved by every one of all races and continents, they will share the same appreciation and respect for it. The acceptances become universal and their demand is high. Therefore it is great to have gold in our saving because our wealth will be as useful anywhere on the globe. All of these qualities make gold has undeniable potential as precious commodity.
