How high can gold go? Most believe this depends on the effect of inflation. However, we are not likely to see this for at least another 2-3 years. There is no denying that the super low interest rates set by the Federal Reserve, European Central Bank and the Bank of England has dramatically increased the money supply. When you consider the extended period for which these low interest rates have been held, inflation seems a certainty. These central banks need to put the brakes on quick.
Also, central banks worldwide are becoming net buyers of gold as opposed to net sellers. This has put upward pressure on the gold price. Look, globally $12 trillion in stimulus has been created. Most of this is yet to be spent. When it is we are likely to see inflation in most areas. The case for $5,000 gold is looked at in detail in this excellent article on commodityonline.com.
It seems that the fundamentals indicate a bright future for gold.
Interesting video that I found on YouTube about why physical silver and gold is a better hedge against hyperinflation than ETFs. Again the choice on how to invest in gold is totally up to you. You know what’s best for you when you buy gold. However, it’s always good hear a broad range of opinion about buying gold before you invest.
The Chinese government has increased the amount of deposits banks must hold on money lent out. This is expected to reduce the amount on money flowing into commodities, and therefore, some predict that the Gold price will fall back.
This may create an opportunity to buy in the dip. However, the purchasing power of China’s currency will improve in the long term as a result of this rule on the fractional reserve system Chinese banks implement. If your currency is the Dollar, Euro or GB Pound this new regulation won’t have a significant impact commodity prices in the long term.
