Why Is Gold So Popular Right Now? Since early 2001 gold has more than tripled in value from $300 to well over $1,400 as I write. In the Clinton presidency in the 90's gold was relatively stable not fluctuating much at all. This rare commodity because of its limited supply in the world market is finite and not unlimited.
Gold Is a Hedge
Investors use gold as a hedge against investments. When the stock market is not doing well and investors feel the need to bailout they will buy gold on the commodity exchanges and speculate. Gold has always been the pacifier for the stock market investor when the value of the dollar is on the decline. When fear dominates the stock markets investors will pull their money out and go to a more secure investment. With jumps in gold last year and predictions that it will go to over $1,500 this year, where would you put your money if you were an investor?
Gold Is a Safety Net
When countries are at war, in recession, with inflation looming, like what is happening in the United States, they will use gold as a safety net. Example: if you have 10,000 shares in GE and the dollar is declining
5% annually you are losing money in your investment. Investors see this and put their money where the market is in an uptrend and has always meant security. That market has been gold since the late 1990's.
When countries are under political strife, experiencing terrorist attacks, destabilization of their currency, financial markets can fall to unsafe levels or completely shut down, as what happened in the United States on 9/11.
Gold and precious metals have always been considered tangible assets. They are symbols of affluence and considered as insurance when fear grips the financial markets. Tangible properties that can be physically bought, like gold & precious metals, is insurance against the instability in the financial world of declining prices.
Potential for Profit Is High
Gold & precious metals offer high return on investment because of the economic times we are living in not only in the United States but the world. Financial analysts predict that gold and precious metals will continue to rise this year and head towards $2,000 an ounce in the years to come.
Oil is the key to the economic engines of every country. Iran is saying to the world that if they are attacked they will drive up the price of oil to well over $200 a barrel by shutting down the straits of Hormuz. If this indeed happens this will collapse the economies of the entire world causing massive inflation and the dollar will be worthless. Where will the world put their money if this war with Iran happens? Gold & precious metals will thrive and accelerate to new unprecedented levels like never before.
Not only is gold and precious metals a great investment at this time when speculation is $1,600 an ounce this year, but if we even come close to a war with Iran you will see speculators drive the price to over $2,000 heading towards $3,000 in the not too distant future. The profit potential in this scenario is exceptional.
Current Economic Conditions
According to information collected by the Federal Reserve Bank of Philadelphia hiring in the labor markets has been modest with true employment at 17% because some have stopped looking. Wages are down and consumer prices have remained stable. Manufacturing has slow growth and imports to Asia have picked up while production elsewhere remains stagnant.
Real estate and construction have picked up slightly while financial loans for housing and in general business loans have waned in late 2009.
Consumer spending in tourism was slightly greater in 2009 than 2008 with a heavier outlay of funds during the last quarter of 2009.
In non-financial services there has been wide spread positive economic activity in advertising, consulting, health-care, education and government services.
Summary
Economic activity remains at a modest level for the nation as a whole while some reporting regions are stagnant to not positive at all. The stock market has regained much of its loss from 2008 and early 2009 when it reached well into the low 6,000's. The stock market has remained stable with slow reversals on bad news days but have managed to regain later in the month.
Speculation is good for the next few quarters as long as inflation remains under control and the dollar does not slip any more than it has. Oil prices have remained fairly stable fluctuating between $100 and
$117 dollars a barrel. The Middle East remains the key to world stabilization.
Israel has found new oil reserves in the eastern Mediterranean Sea and possible new oil will be found in the western Israeli desert where day and night drilling is going on as I write. If Israel becomes financially independent of the U.S. and does not need their funding Israel will not be as diplomatic in its efforts to appease the powers that be in that region. A weakened U.S. will leave Israel to pursue the dismantling of the terrorist networks in the area. With Syria being the proxy state of Iran this could lead to further ill will and complicate the world’s economic condition.
The Value of Gold
Marc Faber, current investment guru & publisher, says that it is prudent for investors to buy gold now as it was when it was going for $300 an oz. Faber explained, "A company stock could be less expensive at $100 dollars than when it was selling for $10, because earning growth has outpaced the appreciation of shares and so its P/E has declined. Gold could be cheaper at the current price then when it was less than $300 an oz. because of the explosion of foreign exchange reserves, reserves in the world, zero interest rates, the huge debt overhang, and the expectations of further money printing," he said.
This should lead us to believe that when countries spend more than they take in and expand their debt ceiling like the credit card companies do when cardholders just pay the minimum then upgrades there credit limit to extremes, you have to say to yourself, what is wrong with this picture? Central banks have engaged in foolish monetary policies and instead of going after the excessive debt growth (increased credit limit), they should go after the deflationary forces. It only makes common sense does it not? But then common sense is not common anymore!
Conclusion
If countries continue on with this irresponsible behavior we are headed for the inevitable total collapse of not only the United States economy but the world economy as well. Would it not be a good idea then to return to conservative values in the financial institutions then to lean toward the liberal fiscal irresponsibility that has brought us to the brink of this financial collapse? You decide it is your world.