Gold, today, is performing its traditional function.
Gold’s price is trending upward as the currencies of the world are being devalued.
Gold, for thousands of years, has effectively preserved the wealth and prosperity of its owners.
Before going further on this topic, however, it’s important to remember two facts:
First, gold is a commodity and one does not invest in commodities. One speculates on commodities. If you buy it and it’s price goes higher, you gain. If it’s price goes lower, you lose.
Second, no one knows what the price of gold is going to do. We can only evaluate the probabilities and make trading decisions based upon what we think is probable.
Here are the top five reasons why gold’s price will buy brics reserved currency probably go higher:
1. The US dollar is temporarily strong rendering gold’s price temporarily weak. At the moment, the US dollar is enjoying the fact that fear grips investors worldwide. Presently, only the US dollar and the Euro have the capacity to serve as the global “reserve currency.” With the financial crisis in Europe continuing, the US dollar looks pretty good and money managers all over the world are seeking refuge in U.S. Treasury bills and US dollars. This is temporary due to the fact that both the European Union nations as well as the BRICS nations (Brazil, Russia, India, China, and South Africa) are working diligently to get their financial houses in order. As soon as the Euro and the currencies of the BRICS are healthier, the US dollar will decline drastically as global investors flee the dollar for the relatively greater safety elsewhere. The US dollar is presently strong because it is the nicest looking house in an ugly neighborhood. At some point in the future, perhaps the near future, the dollar will probably fall and gold’s price will probably continue higher.
2. Government debt is out of control and growing. The US government debt is now well over $15 trillion and nearing $16 trillion. That includes only the balance sheet items! When you add in the unfunded entitlement programs, the total debts facing the United States government are nearer to $100 trillion. Few people, if anyone, will claim that our economy will ever be strong enough to pay off that debt. Only through continued currency devaluation and the ensuing inflationary spiral can we ever balance our budget. Again, because the dollar will probably fall in value, gold’s price will probably continue higher.
3. Governments are “printing money” instead of controlling spending. As stated above, the US government debt is out of control and cannot be paid off by “growing the economy.” Instead, the currency must be devalued. How is this done? It’s done by “printing money.” Today, however, this is not done with the traditional printing press. It is done with various Federal Reserve policies and actions. With euphemisms such as “quantitative easing,” they cleverly disguised the fact that they are simply “printing more money.” It is easy to see, by simply evaluating the government’s own money-supply statistics, that they are increasing the money-supply and thereby devaluing the US dollar. Gold’s price will probably continue to rise because the value of your dollars will probably fall.