The gold standard was “a commitment by participating countries to fix the prices of their domestic currencies in terms of a specific price in gold. National money (banknotes) was freely converted into gold at a fixed price”.

This system was adopted by the major nations such as, UK, Australia, and South Africa until 1931 and by USA till 1933 when President Roosevelt prohibited the private ownership of gold bullion. A new system of exchange was introduced called The Bretton Woods System where the price of gold was set at $34 an ounce and countries could sell their gold to the USA. This system was disbanded in 1971 by President Nixon.

Nowadays all major countries use a system of Fiat money. This is when the value of money is based on supply and demand and its value fluctuates depending on market forces. The gold price still remains linked to the US dollar. Private gold buying is usually in the form of gold bars or coins which is seen as a way of hedging against possible inflation and is regarded as a safe investment.

Historically when you look at the gold market it is evident that the price of gold has an inverse relationship with the US dollar. As the value of gold rises you will tend to find the dollar is weak.

This isn’t always the case though because there are periods in recent years when the dollar-gold relationship has moved in the same direction. One significant period was 1978-80 when gold rose from $200 to $800 in 18 months, prompting investors to buy gold bullion, and it wasn’t due to a weak dollar but the fact that the world’s monetary system was in disarray.

Nowadays, however, the fluctuating US dollar has played a large part in the recent global economic crisis. The weak dollar has been one of the driving forces behind investors turning to buying gold as a hedge against inflation. Gold can be purchased as gold bars, coins, gold mining shares, equities and mint backed certificates. Gold is an excellent investment to have on your portfolio as it low risk which provides steady returns.

Gold bullion is a recognised weight of gold usually sold as bars or coins and is measured in troy ounces. It can be bought or sold at the current market rate and can be owned by not only banks and governments but also by private individuals.

Investing in gold bullion bars in today’s current economic climate makes perfect sense. If forecasters are correct and the price of gold continues to rise, it is the safest form of investment for a good return. Buying gold bars and physically owning it can also give you a great sense of security and independence from the banking systems as you are in control of your investment.

Gold is always going to be around. It has a history of being a safe haven for investments against a financial crisis. Like any investment there is always an element of risk when it comes to investing in any product but in today’s climate    buying gold is proving itself to be the current investment of choice.

Shares in gold mines look set to rocket, suggests market analysts as global demand for gold bullion as a hedge investment picks up speed.

Demand for gold bars in 2010 has been mainly due to anticipation of a rise in inflation, uncertainty over Greece’s debt problems and the fluctuating US dollar. More investors are looking to buy gold as a safe haven for their savings. As a result gold mining companies have been forced to invest more money and increase production in order to meet the growing trend in gold buying.

Some analysts suggest that gold companies see a good return for their investment in gold mining and production as overheads are low. Ian Henderson of JP Morgan says “I am not saying that there is no capital needed by the industry as a whole. But the balance sheet for the industry today is as good as it has been in the past 20 years”. It has been suggested that the mines to watch are Semafo, African Barrack gold, Red Back Mining and Avocet Mining.

In today’s economic climate sensible advice is to buy gold as a safe haven for your well earned savings. However if you are looking for a get rich quick fix you could take the initiative and turn your hand to gold prospecting.

The two main requirements to be a gold prospector are geological knowledge and the ability to do physical work. A good starting point to look for gold is to look where it has been found before. As gold is heavy it is usually found at the bottom of a river or in a receding lake. Panning is the best method to retrieve this kind of gold.

When you find what you think is this precious yellow metal you need to determine whether it is the real McCoy or fool’s gold. This can be determined through chemical tests. If all this sounds appealing go ahead, but surely buying readymade gold bullion is an easier option!

Last week, I did an article on selling ahead of May and going away. Not surprisingly, with the stock market taking it in the neck as I write - due to the Goldman Sachs indictment and a "surprise" downturn in consumer sentiment, gold and gold stocks are also getting hammered. More...