6 Good Reasons To Buy Gold - & 3 Reasons Not To !
This blog has been researching what the experts say at the moment as there seems to be divided views on whether to buy gold now with its price lingering below the USD 800 mark / ounce.
First on to the positives, who feel that Gold at its present value is indeed a good buy :
6 Good Reasons For Buying Gold.
* Gold is your best bet as an insurance policy against bankrupt countries and failed currencies and/or economies.
* High and growing Treasury Debts will lead to inflationa nd hence cause gold to surge in value. Donald Luskin concludes, that gold, the most inflation-sensitive commodity, is coming to realize that when the Treasury issues as much debt as it is now, eventually the Fed will have to buy some of that debt to keep interest rates low, and ultimately that will lead to inflation.”
* Gold is and always has been an asset class of its own and is a strong hedge against uncertain times.
* With gold you can have a physical asset unlike equity and other paper-like investments. (On this issue many advise that you hold physical gold instead of paper gold - see what one expect has to say on paper gold vs physical gold here.
* Gold is very cheap at present ! Many gold experts feel that gold is heavily undervalued and could go as high as USD 1,500 - 2,000 / ounce in the next year or two. (read here for one view of gold reaching USD 2000 in the next 2-3 years!).
* The amount of gold on the planet is very stable (i.e. unlike the supply of paper money) and hence it will always maintain its value better than paper money.
3 Reasons for not buying gold.
* Inflation is turning to deflation (hence the argument that gold acts as a safe haven against inflation is no longer valid). Andrew Mickey notes that “A lack of inflation will certainly put the brakes on any bull market in gold. That is, if we’re really still in a bull market for gold.”
* The high volatility of gold prices at present indicates that we are not, despite what some experts have claimed, in a Bull Market for gold and hence sceptics do not expect the price of gold to soar for some time.
* The price of gold has traditionally been linked with the oil prices, and as we all know the price for oil has dropped from a stagger USD 148 / barrel to now around USD 40 / barrel, with many expecting oil not to make a major come-back again due to slowing demand from major industrialist countries.
Andrew Mickey concludes :
“Should I be buying gold right now?” The answer, for most of us, is no. Gold, at $770 an ounce, is at a midpoint. And if you’re looking to buy gold, chances are you’ll be able to pick it up a good bit cheaper than you can today.”
Conclusion.
Present uncertainties in almost all sectors and asset classes will cause gold to remain volatile for some time, so if one is looking for a short term investment, gold is most likely not the choice or recommendation of this author. However, there seems to be solid arguments for gold being a good investment class if one applies a longer time horizon due to its renowned role as a safe haven against inflation and troubled economies and currencies.
Not everyone agrees to the ever-lasting value of gold of course and Warren Buffet once said that. “Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”
The renowned Dr Doom & Gloom, Marc Faber disagrees with that - check out his latest views on gold from a recent video post on this site.
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