The bull market in precious metals that began in 2000 will continue in 2015 after corrective periods in price as gold continues to re-establish itself to its historic role as real money. Central Banks around the world are continuing the policy known as quantitative easing by printing currency and purchasing debt. The dollar’s rise has stalled as political uncertainty continues to build. Three upcoming fiscal events in the world bear watching this year as global leaders will address growing geopolitical turmoil in the Middle East, deteriorating fiscal conditions in Europe particularly in Greece and the ever increasing speculation of the stock market bubble exploding. All of these factors should contribute to the ongoing growth in the precious metals sector.
Many investors are asking themselves, should I buy gold in 2015? Here are seven strong reasons to invest in gold in 2015 and beyond.
- Overall demand for gold is increasing – Demand for gold has been rapidly increasing worldwide. As the middle class grows around the world, more investors are coming forward and purchasing gold. Central Banks around the world have become net buyers of gold, adding it to their reserves as fiat currencies continue to experience problems.
- Monetary Policies – The U.S. Federal Reserve continues to print money at an alarming rate. In 2012, for the first time ever, the Fed became the largest purchaser of U.S. debt . QE3 the open- ended policy of purchasing bad mortgage debt is adding over 40 billion dollars per month to the Treasuries balance sheet. Even after the tapering of QE, the real problem of an exit plan for the FED is a daunting task.
- Inflation is already in the pipeline – Gas is reaching historically high prices, food prices have increased all while unemployment hasn’t significantly changed and real wages have fallen. Most investors don’t understand the underlying cause of inflation. They think of inflation as rising prices. But the true cause is excessive growth in the money supply. QE1, 2, and 3 have increased the U.S. money supply to level never before seen in history. The world is awash in dollars, euros and yen even as other countries like China begin to enact their own forms of stimulus. This is an extremely bullish indicator for metals.
- Weakness of the U.S. Dollar – The dollar has entered another weakening phase after a brief rebound in 2014. The falling dollar often acts as catalyst to gold investment as more investors seek to protect the value of their assets. The price of gold nearly tripled between 1998 and 2008 as the dollar endured a long-term decline against other currencies. Gold prices again nearly doubled between 2008 and 2012 as the dollar slide accelerated.
- Supply Constraints – A majority of bullion available for purchase came as a result of Central Banks becoming net sellers of the metal beginning in the 1990’s. By 2008 the Central banks slowed their sales and have recently turned into net buyers as they work to shore up their reserves. New production of gold had also been in decline since 2000. In 2011 gold production reached it’s highest levels since 2000, with 2700 metric tonnes produced. Lack of supply will continue to drive up prices.
- Portfolio Diversification – The purpose of diversification is to reduce volatility and risk in your investment portfolio. The key to diversification is to combine asset classes that are not closely correlated to each other. As the stock market has declined or offered flat returns since 2000, gold has reached new highs.
- Geopolitical Uncertainty – Gold retains or increases its value during times of economic, political and social uncertainty. As financial turmoil continues in Europe, political gridlock continues in the U.S. and social unrest roils the Middle East, gold will continue to offer safety in an unsafe world.
Gold is an investment you can hold in your hand. It is a hedge against inflation and has never been worth zero. The commodities bull market that began in 2000 has a long way to go. If you are still asking should I buy gold, the answer is a resounding yes! Gold offers you unparalleled safety and security in an unsafe world.