Reasons Gold No. 1: Don’t Ignore Inflation: The stock market panic of 2008 sent commodity and stock prices – which includes the price of oil – much lower. That launched a huge debate whether deflation or inflation would be the final result. Remember, since 2001 – under estimated price inflation of 2.5% – gold managed to rise 400%. The Federal Reserve is expected to keep short-term rates near zero through 2013 & 2014 leaving the door ajar to ignite more inflation.
To shorten the recession, quantitative easing (massive printing of dollars) exploded the monetary base. As of October 2008, in only four months, the central bank doubled the U.S. money supply, going way beyond anything done in the nation’s history.
On a worldwide basis, central banks have printed up an unbelievable $12 trillion worth of stimulus money, which is Robbing us-the citizens, by greatly decreasing the purchasing power of the dollars already in existence-the dollars in our paychecks and bank accounts.
Most economists agree that [inflation] will win out over deflation eventually.
Gold Reason No. 2: Demand is Exploding: The largest investors – pension funds and hedge funds – are making larger investments into gold. Their highly-paid investment advisors must be telling them [inside Info] the rest of us are not hearing about?
The popularity and success of exchange-traded funds (ETFs) that invest in and hold Gold proves this ‘major trend.’ The world’s largest ETF containing 1,100 tons of the golden metal, the Trust (NYSE: GLD), is the sixth-largest holding account of gold bullion. Investors never had an easier, nor quicker way to osrs gold. (via the Internet, on their laptop) This is not just a U.S. phenomenon. Pursuant to the World Gold Council, worldwide gold demand increased 15% from the second quarter to the third last year (2012).
China & India = Growing Demand!
With a population over 2.5 billion citizens and a deep cultural affection for gold, Asian countries are driving more global demand in a big way. China encourages its citizens to buy more silver and gold and goes a step farther by providing them checking accounts linked-to-gold. China is currently neck-to-neck with India as the world’s largest consumer of gold. A growing middle class whose members are experiencing rapid rises in disposable income are a major driver that’s bullish to keep pushing up the price of gold. (the continuing ‘population expansion’ guarantees more gold-buyers)
Gold Reason No. 3: Central Banks are (new) Net Buyers: India’s recent purchase of 200 tons of gold from the International Monetary Fund (IMF) was the probable reason that pushed gold up over the $1,200 level in December, 2012. Even more importantly is the major reversal that has witnessed the world’s central banks switch from being net sellers into becoming net buyers of gold. It will have been the first time in 20 years banks turned into “gold buyers”, as central banks have been net sellers of gold since 1988. More “buyers” equals MORE DEMAND for gold.
Gold Reason No. 4: The Pending Currency Crisis: Portugal, Italy, Greece and Spain -The “PIGS” – are in very bad fiscal shape. They are not the only ones. Iceland is considered nearly-bankrupt. The United Kingdom, the United States, and other economies are struggling on, barely able to grow their GDP any at all. That grim reality ignited a ‘crisis of non-confidence’ regarding fiat currencies in the minds of most citizens and investors. (*) “Paper-Money is nothing more than paper and ink, backed by the faith and credit of the issuer.” When investors discover their faith in the issuer is greatly weakened, the value of the currency falls lower. Another potential trigger to spark a currency crisis is additional sovereign-debt downgrades from ratings agencies. Under those conditions, the ultimate store of value, – Gold – which is the oldest form of money on earth – will soar higher, as citizens and investors alike take actions to protect their dwindling purchasing power.
Gold Reason No. 5: Don’t Wait for the Mania Stage: The gradually building gold bubble that carry’s gold prices to all-time-record levels will eventually inflate in three distinct stages. In Stage One, the process starts with currency devaluations which will be driven by growing investment demand. (China & India & their citizens buying up 100 tons a year!) In Stage Two, gold prices will experience a stratospheric ascent repeating the late 1970’s all over again. In Stage Three, will be the mania phase, when everyone and their grandmother are jumping in cause they see gold running uphill with price escalations. Truly, those investors who got in early (gold about $1,000 an ounce) could make fortunes as the price of gold balloons to $5,000-an-ounce and beyond.
Many economists predict the $5,000 price will be reached in the third and final phase, if not before. When the price of gold enters the mania phase, like it did back in 1977-79, it will act like it has a jet pack strapped on its back. Today’s market price ($1,200 an ounce) will be dwarfed by the high levels gold prices climb to eventually.
Remember, the whole world-wide gold industry only has a total market value (capitalization) [below] the total value of Walmart Stores Inc. (NYSE: WMT) (about $200 billion). So when the crowd jumps in (mania phase), most of the “big money” to be made quickly will be with investments in the stocks of ‘gold explorers and producers’, where 1,000% returns could be common, figured from today’s prices ($1,200 for Gold; $20 for Silver).
(*) These Demand-reasons explain why rs gold are poised to surge higher from here.
And while I predict gold will reach the $5,000 range eventually, that leaves plenty of room for investors to profit by entering at current levels (Dec, 2013).
Is It Time to Make Your Move?
Everyone should hold some gold in their portfolio, no matter their risk tolerance or age. Owning some physical coins or bars makes economic sense, but it’s a little complicated to enact inside most retirement accounts.
That’s why ‘explorers and producers’ of the gold sector promise the biggest payoffs. Production costs usually rise, as gold prices rise, while profit margins are expected to expand even faster. Once your friend’s conversations turn to gold, for any one of the reasons I described above, gold stocks will erupt and then streak for record highs, just like they did in 1977-79.
When is this likely to happen? In a few years most likely. No one ever knows for sure with speculative frenzies or bubbles.
When this happens, gold will likely create a new generation of millionaires, possibly some new billionaires. Although the mania stage is several years away, the smart investor will recognize the importance and the potential of investing in gold or silver [today] while prices are lower.
There is little doubt today’s $1,200 gold price will eventually look like an outrageous bargain.
Our advice is: If you own gold, gold shares, silver, or silver shares, hang onto them and buy even more on the price dips. In the years to come you will look like a hero to your family for your far-sighted investing acumen and have a great legacy to leave them.
(*) We recommend you [take physical delivery] of your gold or silver. That way you are guaranteed to ‘see it”, “hold it”, or show it to your family members. Owning shares of an ETF that (supposedly) is holding some gold for you way off in New York or Switzerland is way less reliable, as some reports state they may NOT be holding as much gold as they claim, which is NOT the same as [having it in your own personal possession]. Have it shipped direct to your house address or P.O. Box for your ‘personal’ possession?
Right now, in late December 2013, the prices of gold and silver are the lowest in 5 years. It is a fantastic time to buy with gold near $1,200 an ounce and silver at $19.60 an ounce. I just bought some more of both for my family stash.