No. 1: Don’t ignore inflation 1: Don’t overlook Inflation There was much debate as to whether inflation or a deflation. Remember that, under an estimate of price inflation of 2.5% in 2001, gold has managed to increase 400% over the same period. The Federal Reserve is likely to keep short term rates close to zero for 2013 and 2014. However, this will not allow for increased inflation. See the current gold price per gram
Quantitative Easing (massive printed dollars) was implemented to stop the recession. The U.S. central banking had already doubled the money supply in four months as of October 2008. This is far more than any other action in the nation’s history.
A staggering $12 trillion has been printed by central banks worldwide to stimulate the economy. This money is used to reduce the purchasing power of dollars that already exist-the dollars in our paychecks or bank accounts.
Most economists agree that inflation will eventually win out over depression.
No.2: Demand is Exploding: This is the gold reason. 2. Gold Reason No. These high-paid investment advisors should be telling them something that the rest us are not hearing.
This’majortrend’ is evidenced by the popularity and success that exchange-traded ETFs (ETFs), that invest in and keep Gold. The SPDR Gold Trust (NYSE, GLD), which holds 1,100 tonnes of gold bullion and is the world’s most popular ETF, is the sixth-largest gold holding account. The easiest and fastest way to owning gold has never been for investors. (from their laptop via the Internet).
This is more than a U.S. phenomenon. The World Gold Council estimates that world-wide demand for gold rose 15% from 2012’s second quarter to 2012’s third (2013).
China and India: Growing Demand
Asian countries with more than 2.5 billion inhabitants and a deep cultural love of gold are driving more global demand. China encourages citizens to buy more silver or gold. They also offer checking accounts tied-to-gold. China is currently the world’s biggest consumer of gold, right behind India. A growing middle-class with rising disposable income is a significant driver that has made it bullish for gold to go up. (Another reason to buy gold is the ‘population extension’.
No. 3: Central banks are (newly) net buyers of gold 3: Central Banks have (newly acquired) net buyers. India’s recent purchase, of 200 tons, of gold from IMF was the probable reason gold reached $1,200 in December 2012. Importantly, this major reversal saw the central banks of the world become net buyers of precious metals after they were net sellers. This will be the first turn of banks into “gold buyers” in 20-years, as central banks are net sellers of gold ever since 1988. MORE gold is needed when there are more “buyers.”
No. 4: Gold Reason 4: Pending Currency Crisis – Portugal Italy Greece Spain – The “PIGS”, – are all in bad fiscal position. They aren’t alone. Iceland is near-bankrupt. The United Kingdom, United States, and other nations are struggling, barely able grow their GDP. This sad reality caused a ‘crisis in non-confidence’ among investors as well as citizens about fiat currencies. (*). Paper-Money is nothing other than paper and pen, backed with faith and credit by the issuer. The currency loses its value when investors see that their faith and credit in the issuer are greatly diminished. Additional downgrades of sovereign-debt ratings agencies are another possible trigger that can cause a currency crises. As citizens and investors act to protect their declining purchasing power, the ultimate value store, namely Gold, will increase under these conditions.
No. 5: Don’t Wait for the Mania Stage. 5: Don’t Wait For the Mania Phase: The gradually growing gold bubble which is pushing gold prices up to new all-time highs will eventually burst into three distinct stages. The process will begin with currency devaluations. This will be driven by growing investor demand. China and India will each buy 100 tons of gold every year. Stage Two will see gold prices rise again, in a manner that is similar to late 1970’s. The mania phase is when everyone and every grandmother jump in because they see gold climbing up with price escalations. It is true that those who invested early (gold approximately $1,000 an ounce), could reap the rewards of a boom in gold prices, which will reach $5,000 an ounce or more.