Gold Eagles are a good investment for investors seeking to hedge their portfolios so that they retain their value. Hedging money means to take money that you would typically put into a savings account or invest in bonds or treasury bills and put that money into some other sort of investment. The reason investors place money into gold is because gold will retain its value during bad economic times, when other investments may suffer from market inconsistencies.
How does gold retain value when the economy is bad? The answer is simple: gold is a precious metal and metals are valued differently than currency or stocks. The price of gold is influenced by many factors, including inflation, currency prices, market demand and government borrowing. During periods of inflation, the purchasing value of the dollar decreases. However, money invested in Gold Eagles will actually increase in value as a result of inflation. Therefore, no purchasing power was lost on money invested in these coins.
Currency exchange rates are based on how much a foreign currency is worth, compared to the value of the U. S. dollar. These rates change daily. For example, the Euro is currently declining in value, which means if you exchange U. S. dollars for Euros, you will end up with more Euros than you spent in dollars. In other words, they are not exchanged at a 1:1 ratio. This means that the U.S. dollar has more purchasing power than the Euro and also signifies that Europe is entering an economic downturn. This causes more investors in Europe to place investments in gold. According to the New York Times on January 19, recent figures showed that Europe sank even deeper into recession than the United States in the closing months of last year.
The increase of investors in the metals market causes demand for gold to increase. As demand increases and supply remains the same, prices will start to increase. On the other hand, if supply is reduced, the price of Gold Eagles will go up even higher. This is a result of the laws of supply and demand.
Heavy government borrowing can influence the price of Gold Eagles, too. When the government borrows excessive amounts of money, this debt is going to have to be paid back at some point. If the government is unable to pay back its debts due to not being able to collect enough taxes, then the economy can crash. Investors watch to see how much the government is borrowing. If it is seems excessive, then the investors will start to hedge money into gold as a safe haven.