Well, looking at economic data, may it be employment scenario, housing prices or consumer spending, your fears seem warranted. Unless, you are a compulsive stock investor, there are some safe investment bets that you can hold till the crisis scenario completely plays out. Gold has been on the rise since the stocks entered their downtrend, and many would argue if it’s another asset bubble in the making.
Demand for gold has always been there and even its supply has been on a consistent rise till date. But the recent spurt in demand for gold has led the prices rocketing higher, concerning value investors, at a time when there are a very few safe investment options available. So, the question is if there is another storm in the financial markets, does it makes sense to invest in gold at such high levels?
Well to answer that I’ll ask you another question. Where do you think the money will flow if economic growth flattens out and stocks take a wild hit? No doubt, the Fed is ready to go to any extent, but all it can do is print more money, which is not a durable fix to the situation. Gold along with other precious metals will surely continue the up move, whether the prices are justified or not, till the economy remains submerged.
Ideally considered as a perfect hedge against inflation, this time around it’s even bigger as gold is gaining popularity on concerns of hyperinflation. Such alarms are being pressed as Fed is desperately pumping cash into the system to avoid deflation. The economy has shown a slight rebound in the first and second quarter on the back of renewed consumer confidence, but concerns prevail due to systemic risks, which can lead to a much worse economic times than what we witnessed in this recession. So, we can expect gold to glitter, no matter if the prices may seem over stretched to investors chasing value.
Smitten by the gold rush, analysts believe that there is still more to come, as when compared to hyper inflationary pricing that gold enjoyed in 1980’s there is still room for another 30% upside. On the face of all this, deflation worries that are looming investors, if come out to be true, then fasten your seatbelts for an unknown territory, as then no price barrier will stop gold.
We can conclude by saying that gold with its resilience is a crises commodity and limited supply is another factor that keeps the price trending higher. But all this does not make gold a holy commodity as it may seem to many in current conditions. It can fall back on you, if there is unprecedented change in the economic conditions, so plan your investment effectively and don’t let the charm of gold take you blindfolded. Making direct investments though commodity exchanges is not advisable given the nature of contracts, but you can opt for Gold ETFs and physical purchases in bar and coin form.
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