Is Gold a Good Investment Right Now

By: Keith Mcgregor

Fast forward 10 years, it is now year 2018. Investing in Gold has done very well in spite of the chaotic backdrop of 2008 recession. However, lately as the economy goes full swing, is this the right time to investment in Gold?  

Is Gold a Good Investment Right Now

  • The gold bullion price is driven by supply and demand.
    Each year the world’s gold mines produce only 2,500 metric tonnes of gold. The best estimates indicate that the whole planet buys 4,000-5,000 metric tonnes of gold a year. Hence global demand exceeds supply by 60% to 100% annually creating structural shortage situation. Banks are no longer selling enough gold to make up for global demand above the amount of gold mined each year.

  • Gold will reach $1500 to $2000 dollars by 2018.
    Some analysts believe that this could be a soon as the next 12 to 18 months. Fund managers have identified 5 significant factors which will drive the price of gold bullion up even higher:

    1. The decline of the dollar
    2. More inflation in the future
    3. Investors will seek greater safety in gold
    4. Higher oil prices
    5. Boom in demand for commodities and precious metals
    6. A recession is due. It has been 9 years since the last recession
  • Higher US interest rates = A more unstable Economy.
    While higher US interest rates will justify a long-term dollar strength and with it, a falling long-term gold price. The reality for higher US interest rate means, things becomes expensive.

What Happens When Interest rate goes up

  • Mortages increases. US homes will become expensive to own. People have to pay more to own a house. Those with existing loans will see  an increase in their monthly payouts. 
  • Businesses will report lesser profit
    Since more money will be used to pay their interest charges. Investors do not like lesser profit as it means they get lesser dividends. 
  • As the dollar becomes stronger, US goods becomes expensive to export. Foreign markets will have to pay more to own the same goods. They in return either increase their selling price in their homeland or stop exporting from US and look for alternative sources. 

When the economy becomes expensive, a recession may kick in. When that happens, Gold will be the asset to appreciate and own. From an economic standpoint, gold may potentially see increased buying from a stock market collapse or bear market.

Geo Political Stress will cause Gold to Spike
Gold prices will also spike during geopolitical stress. With North Korea constantly in the news, a war may errupt. If that happens, Gold prices will jump.

The question is
Do you buy Gold now or wait for more bad news? 

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