As part of our Why Precious Metals series, we will now address the question that has been asked a lot in the media of late, is it too late to buy gold?
As the economic problems around the world continue to manifest, more and more people are identifying that gold is the ultimate safe haven asset. Quite simply gold is the best way to secure wealth and protect portfolios from the ongoing currency debasement that has seen the US dollar lose over 80 percent of its value in the last decade alone when compared to gold
However, gold is in its eleventh straight year of gains and some have questioned if it’s too late to buy gold. This question was asked when gold doubled to $750 in 2007, asked again when it breached $1000, and then $1500, and no doubt will be asked when gold soars through $2000.
The Drivers of Gold
The best way of answering this question is to look at the drivers of gold. Until governments around the world stop spending beyond their means, stop running huge deficits and massive debts and stop creating fiat (paper) currency, gold will continue to rise.
The first US credit rating downgrade in its history occurred in 2011 due to S&P being wholly unconvinced that the recent debt deal showed anywhere near enough cuts in spending and overall deficit reduction to begin to address the huge financial crisis the United States is facing. Fiscal and monetary responsibility is nowhere to be seen in the US’s foreseeable future. Japan and Europe are facing similar economic crises. As such, currencies will continue to fall, inflation will continue to grow and gold will continue to rise.
How the financial mess the major economies of the world are in unravels is difficult to predict. What is easier to predict however, is that many countries will have to either default or print their way out of their un-repayable debt situations. Either eventuality will result in significantly higher gold prices from the levels we see today.
