Gold Is A Hedge Against Inflation

Get in on the gold action now! Every investor should know that gold is a hedge against inflation. There has been a huge movement in the gold price, and there are several reasons for that. For one, the official inflation rate is about 10%, and investors are getting out of dollars and into gold coins, gold bars, and gold bullion as a hedge against inflation. Buy gold bullion, gold ingots, and gold bullion coins to protect yourself during inflation.

The demand for gold is going through the roof. The demand in 2008 was up 64% as scared investors searched for a safe haven for their money. Countries like China, India, Russia, and Arab states have been steadily increasing their gold reserves. India just made a huge purchase of 200 tons from the IMF.

There is currently about 23 grams of gold available per person on earth. That’s about $840 worth of gold per person. The existing value of all the available mined gold on earth is $3.7 trillion.

There is around 140,000 tons of gold above ground, and that number increases each year by 2,600 tons. That is an increase of about 2% per year, but that doesn’t even come close to satisfying the demand. The demand for gold each year is about 4,000 tons, so the mines are coming up short by about 1,400 tons. Until the recent gold price highs, gold has been selling for around the cost of production.

Due to the low prices in gold and silver, mine supply has decreased by close to 10%. Seeing how the fundamentals for gold show that the demand outweighs the supply and has for a long time, then why has the gold price been suppressed until recently?

Any situation where demand exceeds supply means the price must go higher, but until recently it has not. The gold price has risen from $250/oz in 2001 to $1,140/oz today, but the inflation adjusted price shows that gold needs to be around $6800.

The answer is that there are a few factors that have caused this price suppression and they are still to blame. The central banks have been selling their gold supplies onto the open market in an attempt to suppress the price. It has worked, but central banks are running out of gold to sell.

Another factor that has suppressed the gold price is the advent of paper gold (i.e. exchange traded funds, futures contracts). These investment vehicles simply give you the price exposure to gold. The futures contracts on the COMEX will allow you to take physical delivery of your gold, but many investors are finding that the COMEX is defaulting on the delivery. The default is occurring because the COMEX does not have the gold that they claim they have.

The way the default happens is that the COMEX will either give a cash settlement upon delivery, or shares of the GLD (exchange traded fund). Either way, you do not own the physical gold, which means that you are still holding paper. These paper investments have kept investors in dollars, which has fraudulently propped up the dollar.

All of these gold suppression tactics are starting to come unraveled, and with inflation setting in there is no doubt the gold price will continue to explode. Stay away from paper investments if you can, unless you know for sure that they are legitimately holding the gold. Stick with American Gold Coins, American Gold Eagles, and gold bars.

You have every reason to buy gold now. Remember, gold is a hedge against inflation and a store of wealth. Just look at the gold price in the past month. The price of gold per ounce one month ago was $1,058/oz, and the current price of gold is at $1,140/oz. Smart investors are going crazy for gold coins because gold is the only safe investment right now. Educate yourself about the benefits of investing in gold and how to buy gold. You won’t be sorry!

It’s hugely important that you prepare now for a dollar collapse, and save yourself financially while you still can. You can now grab your FREE instant download copy of “Why You Should Buy Gold Now” – created especially for the gold investment newcomer – by clicking here.

Record Gold Price As India Buys Gold

A record gold price was reached today topping out at $1,090/ounce. Gold has really been on the rise this past year and the price of gold per ounce just experienced an all time high only 20 days ago topping out at $1,072. The gold price is up 23% this year as smart investors look for a safe haven for their money. The price of gold does not seem to be stopping any time soon.

The recent new high is due to India buying gold from the IMF. The IMF sold 200 metric tons of its gold reserves to the Reserve Bank of India and claims it is to take care of their debt obligations. Selling 6.2 billion dollars worth of gold to India is viewed by many as a way to flood the market and suppress gold prices, further propping up the reserve currency known as the dollar. As most people who follow the gold and silver markets know, gold and silver play the role as a hedge against inflation.

The U.S. Dollar Index has fallen 6.1 percent for the year as our government continues to inflate our currency and recklessly devalue our dollar to the point of no return. Most countries around the world, notably large debt holders like China, Russia, and Arab states are scrambling to get out of dollars. These countries are careful not to pull out of the dollar quickly or completely due to the effects it could have on their current holdings.

For example, China has not stopped buying Treasury bills, they are no longer purchasing long term notes though. This is a huge red flag for the green back and the stability of the world’s reserve currency.

China has been a buyer and has increased its gold holdings by 76% since 2003. When, not if China decides to make a large purchase we will see a massive impact in the gold price. China is already diversifying out of dollars and investing in real assets such as natural resources, minerals, mining, and agriculture.

China has recently offered their citizens the right to own silver bullion, which has been outlawed in China until recently. The Chinese know that hard assets are the place to be during economic uncertainty, which is why they have outlawed the export of gold and silver. Maybe the Chinese government hopes to stake its claim of having the next gold/silver backed reserve currency.

Jim Rogers-Gold Seek Radio

 Since the creation of the privately owned Federal Reserve System, the government has had the ability to print as much money as they deem necessary. This has had huge consequences on our dollar. One indicator you can look at to see how far the dollar has fallen is the Gold/Dow ratio.

The Gold/Dow ratio is simply a way to show you how much our dollar has actually fallen. In 1933 a one ounce gold coin could buy the Dow Jones. In 1980, during the last gold bull market, the gold price was $825/ounce and the Dow Jones Industrial Avg. was at 825. So, it took one ounce of gold to buy the Dow.

Fast forward to the year 2000, which is when this bull market started and you see that the ratio was 44:1, meaning that it took 44 ounces of gold to buy the Dow. This indicates the inflationary effect our dollar has had on the market. Only a Gold/Dow ratio of one is an honest account of where the gold price should be.

It’s helpful to think of gold in value terms rather than dollar terms, because dollar terms mean nothing if the dollar is constantly falling in value. An example of thinking about gold’s value is to simply look at what you historically could have purchased for a one ounce gold coin.

In Roman times you could purchase a toga, belt, and nice pair of shoes with one ounce of gold. In 1930 you could have purchased a nice men’s suit for one ounce of gold, and today you can still buy a nice men’s suit for one ounce of gold. You could use a months rent as an example as well. In 1930 a one ounce gold coin would buy a months rent, and you can still do that today.

So, the Gold/Dow ratio today is about 9, and many experts are expecting the ratio to go to 1 or even less. You can see how the Gold/Dow ratio is going in cycles from 1 all the way up to 44 in 2000, and is on its way back down. The bull market in stocks from 2003 to 2007 is only exposed as a fraud when you price the market in gold, because gold is honest money and cannot be inflated.

When the market was rising and people never thought it could end, it was due to easy lending and extremely low interest rates. So, the stock market was shown to be in a bull market, but when priced in gold it shows a different story. Either the market will have to drop significantly to meet the price of gold, or the gold price will have to rise dramatically.

The Dow Jones is at 9,772 today, and for the Gold/Dow ratio to go to 1 again some very interesting things will have to happen. You do not want to be in the stock market or in dollars if either of these scenarios occur. If gold goes to 9,772/ounce then the holders of gold will be very happy with their investments, and they will have hedged themselves against extreme inflation.

I highly recommend this gold investing guide before purchasing. It could save you lots of money.

Remember how we talked about how you should see gold in value terms rather than dollar terms. Well, in this scenario you could definitely see the price of a nice men’s suit being around $3,000.  Why not $9,772 for a suit? Even though gold buyers are protecting their wealth with gold, there will be a chance to profit handsomely, and that’s why many are investing in gold.

The amount of gold in the world would only amount to a cube the size of a (tennis court width) x (tennis court length minus 3ft.). There is only about .75 ounces of gold per person in the world. If all of the fiat paper dollars were converted to gold then the gold price would be over $50,000/ounce. Remember that just 80 years ago you could take your $20 bill to the bank and exchange it for a one ounce gold coin. That was before our money supply was inflated beyond belief. That just shows the massive inflation and abuse that our government is doing to our money supply.

Governments around the world are knowingly debasing their currencies. That is why every fiat currency (currency backed by nothing e.g. gold, silver, oil) in history has failed. The U.S. has had more than one fiat currency. The dollar is second only to the Continental. This was the first U.S. fiat currency. It was devalued so much that it earned the slogan “Not worth a continental”.

Economist Maynard Keynes said it best when he talks about devaluing currencies.

“There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose”.   – Maynard Keynes

Another way to profit from gold is through mining stocks. Mining stocks are not talked about much, but they will offer much higher returns than owning just gold. This is due to the leverage of mining stock companies. An example I like to give is from the last gold bull market from 1972-1980 when Lion Mines share price went from $.07/share to $380/share. For a penny stock trading at $.07 to go that high is almost unbelievable, but it happened.

Some people became multi-millionaires in just a few years. Lion Mines was not the exception either. At the beginning of the gold bull market most mining shares were trading under $2.00/share and many under $.50 /share. When the market peaked in January 1980, most mining stocks were trading at $50/share or more.

This is a very high risk market due to the unstable nature of mining and exploration companies, but I am confident that these companies will be fine due to the strong gold fundamentals, and the high gold prices we are seeing. Penny stocks can make you very wealthy if you follow the right guidelines and do your homework.

 It’s hugely important that you prepare now for a dollar collapse, and save yourself financially while you still can. You can now grab your FREE instant download copy of “Why You Should Buy Gold Now” -- created especially for the gold investment newcomer -- by clicking here.