‘The desire for gold is the most universal and deeply rooted commercial instinct of the human race’.

                                 Gerald M. Loeb

Global demand for gold appears to be on the rise, and what is interesting for stock market investors is that the two primary countries fuelling this demand are India and China. Two very large, and growing, markets.  

One of the most basic economic principles to understand is the law of supply and demand. When demand exceeds supply, the price goes up, so the theory goes. Economic volatility and recession are key factors that also impact on the price of gold. When investors panic they tend to flee equities and buy into something solid and tangible, and gold fits that description quite nicely.

 ‘As fewer and fewer people have confidence in paper as a store of value, the price of gold will continue to rise.’

                             Jerome F. Smith

1.     Double Dip Recession For Double Bounce Price

If the world does indeed head into what is termed a double dip recession it is likely that this will benefit the price of gold stocks.

‘No other commodity enjoys as much universal acceptability and marketability as gold’.

                                    Hans F. Sennholz

As confidence in business wanes, investors look for safer and safer investments and gold is usually high on the shopping list.

2.     Digging For Gold

There are many gold mining stocks listed on the stock market. Take some time to investigate the mining and exploration sector and try to filter out the riskier looking companies from those that tick all of your criteria for possible selection.

3.     Gold Is Boring. Just What You Need

In times of volatility and economic uncertainty investors do not buy into gold shares expecting to make a lot of money and earn dividends, but rather they buy into gold stock expecting to protect their wealth.

‘As good as gold’.

                                   Charles Dickens

In times of economic uncertainty many investors will argue that there is nothing as good as gold, but like any stock market investment commodities like gold can and do over-heat. Be mindful of the price you are paying within a historical context and secure your investment at a price that provides you with a margin of safety.

Recessions come and go, and as confidence returns and investors return to equities there can be an impact on the price of gold stocks and shares. What makes gold an interesting investment currently is the economic development and growth of China and India. If the economies of those countries wobble, gold investors should pay attention. Be wary of buying high and becoming another statistic in the latest gold rush.

Jamie E Smith is the author of Making Money From Stocks And Shares

This content was provided by one of our users, Jamie