The Time Is Right: Multiple Factors Indicate Now Is the Time to Invest in Gold

When an investment columnist who makes it a point to tell you, “I am no gold bug,” writes a column entitled “Gold can glitter if stocks hit the rocks,” it should serve as a pretty good indication now may be the right time to invest in gold.

Jeff Reeves writes for MarketWatch, “…given the continued volatility in the stock market and the risk of a correction, it’s worth considering a targeted bet on the precious metal.” Reeves is usually a technical analyst of the precious metals markets, while we look at the fundamental reasons for investing in gold and silver. When these two methods of analysis align, investors should take note.

In fact, there are a number of factors that indicate investors should consider gold now. Perth Mint Australia recently published two columns (here and here) detailing a dozen good reasons to consider a move into the yellow metal.

You can break these reasons into roughly three categories:

1. Historical factors that always make gold a good investment
2. The current economic picture in the US
3. Global economic factors

Let’s take a look at some of the most compelling reasons offered by Perth Mint Australia, starting with some historical factors.

Gold Historically Holds Value

While inflation eats away the purchasing power of fiat currency, gold tends to hold its value over time. The US dollar has lost up to 98% of its value since the creation of the Federal Reserve, according to some estimates. But gold continues to buy roughly the same amount of goods it did centuries ago.

To be somewhat glib, an ounce of gold could buy you a quality toga in classical Athens just as it can buy you are reasonable suit today. Perhaps surprisingly, even though the USD only purchases approximately 2% of what it did a little over a century ago, it is actually one of the outperformers in the fiat currency realm – you only have to look as recently as Zimbabwe to see some real destruction of fiat currency purchasing power.”

Owning Gold Serves as Insurance

Owning gold historically protects portfolios from systemic risks and volatility inherent in any economic system. Gold represents stability. Reeves writes that the current economic climate doesn’t bode well for stocks, making that insurance policy all the more important.

All bets may be off if we see a correction in equities, coupled with a rising-rate environment that threatens big principal losses for anyone in long-term bond funds. In such a world, gold may be quite attractive — particularly to investors focused on protecting the profits they’ve made after a big run for stocks.”

The potential volatility of the stock market isn’t the only factor in the US economy that indicates now is a good time to consider gold.

Money Printing

It’s no longer necessary for the Treasury to print money in order to increase the money supply. It’s basically just a matter of adding some zeros in a computer program. The Fed has already engaged in multiple rounds of quantitative easing, and Peter Schiff and Marc Faber believe the Fed will engage in another round. And it’s not just happening here in the US. Central banks all over the world have followed suit.

It is unclear what inevitable outcome this will have on the global economy in the medium to long term, but what is clear from history – more money chasing the same amount of goods (including gold) inevitably leads to increasing prices.”

A number of other global factors indicate it’s time to consider gold, including increased demand for the metal, currency debasement, and excessive global debt. But one global factor stands out above others.

The Rise of Chindia

Nearly 40% of the world’s population lives in China and India, and both economies are rapidly developing. GDP per capita is growing at a rapid rate.

It’s also important to note that as well as a shared border, they have fairly complementary economical models with China focusing on manufacturing and India on services, including IT. Both countries have a strong cultural affinity with gold and further GDP per capita growth would likely prove supportive of gold demand in the medium to long term.”

One should also factor in Chinese monetary policy. Peter Schiff believes at some point, China will unpeg its currency from the dollar, and that could lead to a huge increase in the price of gold. And China is currently buying up gold as part of the “Silk Road” initiative to boost trade.

Taken together, all of these factors point to now as the time to invest in gold.

Get Peter Schiff’s latest gold market analysis – click here – for a free subscription to his exclusive weekly email updates.
Interested in learning more about physical gold and silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!