A variety of factors affect the price of gold. Currently, many of them are combining to drive the price of gold to all-time record highs. Let's look at a few of the factors that affect the price of gold. 1) Uncertainty- Gold is a Crisis Hedge We have said this many times over the years but it bears repeating again gold is more of a crisis hedge than an inflation hedge. When uncertainty rears its ugly head... gold does well. That uncertainty can take many forms and one of them is "monetary uncertainty". So if people don't know what the value of their money is going to be in the future (i.e. inflation) they will shift some of their assets to gold (driving up the price of gold). So as far as … [Read more...]
5 Reasons to Invest In Gold
Gold has a long history that goes back to thousands of years. As we said here, "Gold came in common use in 3000 B.C. when Egyptians started making it into jewelry. It wasn’t until years later that gold began being used as a medium of exchange." It has cultural significance in most parts of the world. Throughout most of this time, gold was money. Paper or "fiat currency" did not exist until fairly recently. However, today the investment trends in gold have changed. Now, people invest in gold mostly for economic reasons. Investors all around the world buy it because they see gold as an inflation hedge. Here, in this blog, we'll discuss five important reasons to invest in gold right … [Read more...]
Investing to Fight Inflation
While inflation has been low in most developed countries over the last decade, there are places where it is starting to pick back up, with stronger growth outlooks for several major economies. As we can see from the chart below the OECD is projecting massive inflation in 2020 for both Turkey and Argentina at 12.6% and 22.7% respectively. The average of all OECD countries is a low 2.4%. The OECD Inflation projection for the European Union (EU) is also surprisingly low. Who would have thought that countries like Italy, Spain and Portugal could maintain such low inflation rates, with the highest being Hungary at 3.8%. Back in June 2019, the Telegraph published an article about how the … [Read more...]
How High Inflation Drives Countries Towards Crypto
What is CryptoCurrency? A cryptocurrency (aka. Crypto), is an alternative form of payment created electronically rather than through government fiat (decree). The idea behind it is that an algorithm creates a limited amount of currency that is available to individuals to use instead of cash, checks or credit cards. The technology behind it allows you to send it directly to others without going through a 3rd party like a bank. Initially, the untraceable nature of cryptocurrency led governments to suspect that it was being used for nefarious purposes. And some notable cases of purchases on the "dark web" were prosecuted like the "Silk Road" case which operated from 2011-2013. Since then … [Read more...]
Gold Price and Its Relationship with Inflation
Inflation is the increase in the price you pay for goods and services, which affects the purchasing power of your money. This is more accurately called "price inflation" as compared to "monetary inflation". As inflation increases, the value of your money decreases. There are many different causes of inflation, but the most important cause is an increase in a country’s money supply. When the government decides to print money or implement a quantitative easing program, the money supply is increased (i.e. monetary inflation), thus affecting the general level of prices. As we can see in the following chart, the Federal Reserve engaged in three phases of quantitative easing i.e. QE1, QE2, … [Read more...]
Gold as an Investment
The main idea behind investment is to grow and preserve wealth, and in many cases, find unique ways to generate more income. Popular wisdom has it that when interest rates rise gold prices fall because the opportunity cost of holding a non-interest bearing asset is growing. However, contrary to popular wisdom, recent interest rate hikes by the US Federal Reserve have coincided with a rising gold price. At the same time, investor confidence in the stock market is faltering due to the FED's actions. Thus many investors can be seen rushing to the financial security offered by safe-haven assets such as gold. Rising Interest Rates Quantitative Tightening This is why gold … [Read more...]
Inflation is Officially Back
January 2017 saw a 0.6 percent hike in the Consumer Price Index, which pushed the annual inflation rate to 2.5 percent. This is the highest inflation rate in five years. The rate is higher than what many economists had anticipated. After several years of economists worrying that prices might fall, inflation has officially come back for the first time since the peak created by the massive second round of "Quantitative Easing" i.e. QE2 in 2011. QE 1 and QE 2 The first round of Quantitative Easing (QE1) resulted in an inflation rate of 2.72% in 2010 but as soon as the monetary spigot was turned off, the inflation rate fell, so the FED instituted QE2 which then resulted in an inflation rate … [Read more...]
Investing in Gold
Throughout history, people have been attracted to gold. It is considered one of the most precious metals. In ancient times it was primarily used as jewelry or for fabricating religious items. Often gold was the only money so there was no such thing as "Investing in Gold" since holding gold coins was simply considered "saving". Today however, since our money is not based on anything but "the good faith and credit" of the government, investing in gold is not only possible but also advisable. But for all its history, there isn't really that much gold around. If you collected all the gold ever mined, from every corner of the Earth and put it into a single pile it would only fill a 5-story … [Read more...]
Choosing the Right Investment: Gold vs. U.S. Dollar vs. Bitcoin
Rosland Capital recently produced an interesting infographic comparing the ten most important traits of an investment or more precisely of a store of value or currency. They offer physical gold and precious metals backed IRAs as a method to add stability to the mix. Including gold and other precious metals in your portfolio lowers your risk by diversifying from paper assets, thus hedging against the economy and inflation. The infographic compares Gold, the U.S. Dollar and Bitcoin showing how each ranks for these 10 characteristics on a scale of "High", "Moderate" or "Low". The ten important traits are: Scarcity- Being in short supply or rare. This is important because in order … [Read more...]
Should You Invest in Gold?
Almost everyone will agree that making the right investments is one of the best ways to secure your financial future. Unfortunately, figuring out which investments are right for you is easier said than done and everyone knows only crazy people invest in gold, right? It's easy to assume that just putting all your money in a bank account is the safest thing to do. But with today's almost non-existent interest rates even low inflation could cause you to have a net loss in purchasing power over time. So obviously you need to find something that will provide a bit better return to counteract the effects of inflation. To do that, traditional wisdom tells you that you have to take on higher … [Read more...]
