Have you seen gold prices recently? What am I saying… of course you have! Every living creature on the planet knows about the superstar commodity Gold. Everyone knows it’s jumping in value. Everyone has seen it climb from the depths of a few hundred dollars an ounce a few years ago, to its lofty perch today.
As a matter of fact, Gold recently crossed above the $1,500 an ounce level. As a result, it became headline news for many of the major networks. While many analysts and news anchors go on and on about where gold prices have come from…
What’s missing is any talk of the future.
It’s easy to say Gold has climbed and it’s been a great investment… but what should you do now?
What do you do if you don’t own any gold?
Should you hold the Gold you own?
Should you buy more?
These are great questions… and I’ll get to them in a moment. First, let’s look at how we got to where we are today.
In the last few years, Gold prices have reached levels even the most aggressive Gold bugs were afraid to dream of. Just look at the charts.
Chart courtesy of stockcharts.com
Right now the market’s filled with huge demand for the precious metal. And some analysts… at least those with the smarts to look into the future… are calling for gold to reach even higher levels. Some are calling for $2,000… $3,000… even $5,000 an ounce for the precious metal.
While it might seem aggressive right now, sky-high estimates like these aren’t out of the question.
Here’s why….
The US Federal reserve is creating an inflationary environment around the world.
Many people claim that Ben Bernanke and the United States Federal reserve are the most powerful people in America today. That’s wrong… they’re the most powerful people in the WORLD today!
The policies they set, and the changes they make to interest rates and the value of the US Dollar ripple though the global economy. They touch everyone in some small way… and their power isn’t to be underestimated.
You don’t need me to explain their recent actions. They’ve flooded the market with billions of dollar of easy money. They’ve pumped the US banks full of cheap money. They’re purposefully destroying the value of the US Dollar.
As a result, it’s created an inflationary environment.
Your US dollars don’t buy as many goods as they used to. Remember, basic economics tells us the greater the supply the lower the value.
And that applies not only to goods and services you might buy, but also the purchasing power of the US Dollar as well. The more US Dollars the Fed puts into circulation, the further the value (or purchasing power) will fall.
It means your hard earned buck buys fewer and fewer goods.
Want proof? Just look at gasoline prices. When I started driving… a long time ago… I could regularly buy a gallon of gasoline for under $1.00. It doesn’t take a genius to see the price of gas moving higher.
Over the years, it’s clear what inflation has done.
A little inflation is “OK.” Too much can destroy an economy.
Again, back to my gasoline example… today some people are paying more than $4.00 a gallon for gas. Prices are jumping by 5 and 10 cents a week! Every driver in the nation knows that’s too much – too quickly.
Gasoline is a perfect example of how inflation impacts every citizen. When you filled your tank of gas, it used to cost just $40 bucks (obviously depending on the tank size). It wasn’t cheap but it was doable… now with prices jumping like they are, it might cost you $55 or $60 to fill up.
That’s an extra $15 to $20 every week out of your pocket. And that money has to come from somewhere.
It’s not coming in the form of higher paychecks. With unemployment rates near 10%, worker’s compensation isn’t exactly leaping higher. When was the last time you got a bump in pay?
That means consumers need to steal the extra gas money from somewhere else… As a result, they buy fewer goods, they eat less, and they drive less. These kinds of changes directly impact the economic rebound. And it’s not a good direction to be heading.
That’s enough economics for today.
All you really need to know is the cheap money from the Fed is driving the cost of everyday goods higher and higher… and that’s called inflation.
As a result, the value of hard assets will continue to climb.
Commodities are a hard asset… so is real estate, and even pipelines! However for centuries, humans have always gravitated toward precious metals as a store of value. Gold, Silver, Platinum, even Copper and Lead have big value in an inflationary environment.
As a result as long as inflation is a threat, the price of precious metals like Gold will go higher.
How aggressive is the threat of inflation right now?
Just look at Canada… The EuroZone… and even Britain…
In the last few months all of these countries have seen big jumps in their Consumer Price Indexes. The CPI is simply a measure of what it costs for consumers to buy a basket of goods. It’s a very easy way to measure inflation.
As the CPI number climbs, the market quickly sees the impact of inflation. Higher inflation means higher Gold prices.
Listen folks – Gold is going higher.
If you don’t own it yet… buy it. If you own it already, keep holding. In my mind, there’s only one direction for this precious metal to head, and that’s higher!
Gold is heading higher and $3,000 and even $6,000 an ounce might not be out of the question. Only time will tell. To steal and twist an old saying… the best time to buy Gold was 5 years ago… the second best time to buy Gold is right now. If you don’t have any yet in your portfolio, consider adding some soon.