Gold Investment: Whether Guided By Love or Fear…Is The Answer
Gold investment is returning to where it should be. According to the World Gold Council (WGC), the claim for gold rose 4% last year regardless of higher prices. Gold prices have risen roughly 28% every year.
In the jewelry and investment arena, it was China who led the pack throughout the last quarter of 2011. Demand in India declined after holding first place for 11 quarters. Despite this, throughout the year, India bought 933 tons in 2011 as opposed to 770 tons purchased by China. This tendency by China to be on a relentless track of buying gold has just begun. As reported by HSBC Global Research, gold imports from Hong Kong were 10 times the norm from January through November 2011 even though they were down by half in December. HSBC anticipates this rise to persist as Chinese incomes will continue their claim for gold. It will most likely be domestic demand which will incite at least 20% growth in the gold petition by China for this year.
Notwithstanding their heavy demand, India’s esteem for gold does not depend on external determinants which will place it again in the top spot very shortly. The WGC’s managing director for the Middle East and India, Ajay Mitra, stated that gold has always been a part of India’s history, culture, and tradition. She has personally observed the forte of this connection in many different circumstances. She even goes so far as quoting a traditional Indian maxim which expresses that if there is no gold before a wedding, then there will be no wedding. Period.
On the other side of reasons for investing in gold are the ones that are driven by the Federal Reserve when it openly indicated its plan to maintain inflation at unusually shallow levels for at least 2 more years. The Federal Reserve’s goal is to maintain a 2 percent inflation rate, which translates into a 33 percent loss in value of the U.S. dollar for the next 20 years. Approximately 10 percent of the value of Americans’ reserves will disappear into thin air in the next four years. This will be our reality. After the gold standard was halted, more or less 40 years later, the purchasing power of the dollar has been sinking. When we think we have a dollar in our pockets, what we really have is 18 cents. Sad, huh?
Warren Buffet blames the government and its universal powers for abolishing investors’ purchasing control. His justification is that stock investments present the greatest long-term investment prospect because interest rate levels do not affect the loss of purchasing power because of inflation. Nevertheless, there are those will be happy with the low interest rates because of their high debt. The governments of the developed world will now have the opportunity to deal with their massive levels of debt effortlessly. If we only look at 2012, the U.S., Japan, and Europe will relinquish $8 trillion in federal debt.
At this point in time, there is no turning back. And it is only gold that will offer the best security against long-term purchasing power as well as wealth preservation. This is why we must all continue our gold investments or risk losing everything.