Why is Everyone Buying Gold Coins?

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Feb 04 2010

It’s not too late to invest in gold. Gold is up by 24% and is expected to go higher. Today, there are several reasons why you should invest in gold and paying attention to these reasons will help you feel comfortable about your investment.

There are a lot of factors involved that are creating gold to skyrocket and these factors make buying gold a very good investment.

The savvy investor will heed these economic conditions that make gold an attractive investment. At this time, owning a precious metals portfolio is a good idea. Below are some of the reasons why gold will increase in value and could rise to $2,000.00 an ounce.

Economic Stimulus:

Now, that the government has put trillions of dollars of stimulus money into banks and businesses to ward off a global recession, this excess money in the marketplace will eventually boost up prices for goods and services. This causes inflation and lowers the investors’ confidence in paper money. Therefore, the investor will buy gold to protect their wealth against inflation and, thereby, making gold go higher.

Volatile Stock Market:

In 2008 the stock market turned down dramatically as the global economy went into recession. While the stock market has somewhat recovered, it still remains volatile. Because of this global economic recession, it created new gold investors along with established gold investors, which drained the gold inventory, thereby, driving up the price of gold. Investors will buy gold to preserve their wealth against a volatile stock market. This makes gold go higher.

Downturn in Real Estate:

Real estate was always a great investment until the housing debacle. Homeowners have lost from 18% to 50% of their homes value depending upon where you live. Buying gold will help to protect you from these difficult and trying times. This will make gold go higher.

China:

Because of their huge trade surplus with the United States and Europe, they are buying the United States debt as well as diversifying their resources by investing in gold. Since Chine is now a large gold investor, this is creating a supply shortage. This will make gold go higher.

Low Gold Prices and Environmental Controls:

In the 1980’s gold was $850.00 an ounce. Then in 1999 gold dropped to $252.00 an ounce. Because, of the low price of gold and the environmental controls that were placed on mining of gold, this discouraged mining companies from discovering new supplies of gold. Now, this creates a shortage of gold and the supply of it is not meeting the global demand of gold. This will make gold go higher.

Low Interest Rates:

When interest rates are low, investors will look away from paper assets and look toward gold. Therefore, there is little incentive for hedging which will result in the removal of gold from the market. This will also shrink the gold supply creating another lack of balance in the marketplace where supply does not meet demand. This will make gold go higher.

Credit Crisis:

The United States economy has been hit with a tightening up of the credit market because of the losses associated with the housing and financial areas. The Federal Reserve in an attempt to lift up the economy out of the recession, they cut their interest rates to nearly zero. Rate cuts pushed down the investment returns on paper assets making many of the investors buy gold. This will make gold go higher.

All of the above creates higher gold prices and in this economic recession where the currency is declining and inflation is looming there is no better time to invest in gold. This is why everyone is buying gold and will continue to do so.

Remember gold has nearly quadrupled in ten years since going from $282.05 on January 4, 2000 to $1081.50 on January 30, 2010 Bad economic times run up the cost of precious metals and the economic recession we are in now is no different. The housing market is very weak, the dollar is weaker and business is slow. As a result of all of these economic conditions makes the price of gold go higher. Gold is a commodity that is subject to the normal forces of supply and demand.

On December 2, 2009 gold hit an all time high of $1212.50. The current economic recession is not out of the woods yet and economists don’t see a turnaround anytime soon, therefore, the possibilities of higher gold prices remain positive.

Gold is a hard resource that does not change and is easy to store. If you want the investment company you bought the gold from to store your gold, make sure they are reputable as they will charge you storage fees to keep the gold. Or, you can have the gold delivered to your home and you can keep it in a safe or a safe deposit box.

Gold remains the most practical store of value. When you see the price for gold drop, it is an opportunity to buy and get into the market before the price goes back up. Gold is a long-term investment opportunity. Like real estate, now is the time to buy while the prices are low. Eventually, the market will turn around and the real estate market will start to go back up.

While precious metals (gold, silver, platinum, and palladium) are all in a bull market right now, precious metal analysts feel they still have a long way to go. Analysts believe investors should consider diversifying some of their assets into precious metals to hedge against inflation which may happen by the end of the year. Even though investors feel that the precious metals market may have peeked, if inflation hits, they will be sorry they didn’t get into the market ahead of time. The U.S. Government is printing money at an astronomical rate making inflation a very real possibility.

Precious metals, unlike shares, are not affected by poor business management, strikes, high costs and/or bad hedging policies. If the dollar remains weak or weakens further, the price of gold will go up.

Gold is a sound long-term investment.

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