With the American dollar seemingly ever sinking (the world reserve currency till right after the WWII), as a consequence of the worst financial meltdown ever and the huge debt owed by the government, investors are rushing to gold as the optimal investment means in troubled economic times. Besides, the government continues to print too much money, increasing thus the inflation and prices, of gold included. Further, by buying a trillion worth treasuries to keep large banks happy, the government was proven to give gold and exchange trade funds a 10% upside. The Middle East crisis is also a booster for gold investments and as such likely to increase rates. Add to this the fact that last year global gold demand doubled, and you'll see why gold prices are never to stagnate.
So, it seems that lower the dollar gets, higher gold gets. To suppose a gold bubble behind all these spectacular increases is groundless, first, because, if looking just at the last century, it's obvious that gold, unlike other currencies, had always found a way to maintain its buying power, and, secondly, because, according to figures, it has witnessed a continuous appreciation over the last nine years. These facts, in conjunction with the fact that gold prices have hit 30 year highs recently make the investment in gold a judicious choice for those knowing how to buy gold.
Timing is everything for investing in an asset whose price is on the rise. The disproportion between demand and supply is another factor that makes its price growing. Whereas the demand had doubled in a single year, the supply has known a 25% increase since 1990 - over more than twenty years! So how can one seriously expect gold rates to stay still?
At the same time, foreign countries hold currency reserves in value of about 9 trillion dollars. If the dollar continues to weaken, of course, they will transform them into gold bullion holdings. And imagine that if only 1% of these enormous reserves are to be changed into gold, the gold rates are to double right away, not to speak about further implications.
And last but not least, here are central banks that tried their best to keep gold rates low buying now the precious metal by the ton, overtly. After what happened to reputed American banks following the mortgage credit crisis, no bank will risk keeping only currency reserves. After all, it has been proved that the bank system may crash and, if the currencies are to depreciate, so will do all their paper assets. That is the reason why banks and investors alike are attracted by gold: it has intrinsic value and relieves anxiety over financial losses or bankruptcy. So buying gold is a perfect option.
So, it seems that lower the dollar gets, higher gold gets. To suppose a gold bubble behind all these spectacular increases is groundless, first, because, if looking just at the last century, it's obvious that gold, unlike other currencies, had always found a way to maintain its buying power, and, secondly, because, according to figures, it has witnessed a continuous appreciation over the last nine years. These facts, in conjunction with the fact that gold prices have hit 30 year highs recently make the investment in gold a judicious choice for those knowing how to buy gold.
Timing is everything for investing in an asset whose price is on the rise. The disproportion between demand and supply is another factor that makes its price growing. Whereas the demand had doubled in a single year, the supply has known a 25% increase since 1990 - over more than twenty years! So how can one seriously expect gold rates to stay still?
At the same time, foreign countries hold currency reserves in value of about 9 trillion dollars. If the dollar continues to weaken, of course, they will transform them into gold bullion holdings. And imagine that if only 1% of these enormous reserves are to be changed into gold, the gold rates are to double right away, not to speak about further implications.
And last but not least, here are central banks that tried their best to keep gold rates low buying now the precious metal by the ton, overtly. After what happened to reputed American banks following the mortgage credit crisis, no bank will risk keeping only currency reserves. After all, it has been proved that the bank system may crash and, if the currencies are to depreciate, so will do all their paper assets. That is the reason why banks and investors alike are attracted by gold: it has intrinsic value and relieves anxiety over financial losses or bankruptcy. So buying gold is a perfect option.
About the Author:
Ask the advice of professionals on how buying gold can aid you in times of economic turmoil.
No comments:
Post a Comment