Investing in Gold

The Shango Report Dec. 2011

Gold is a safe haven from the world crisis that is slowly diminishing faith in financial and monetary systems. History has proven that gold has always been money that holds its value in time of trouble. As the U.S. dollar devaluates along with currencies throughout the world, inflation will eat up your paper money much faster than your pay raises can keep up with inflation. Since the gold windows of the United States were closed by Richard Nixon in 1971, gold has been able to adjust its price in the world markets. While there are different reasons for golds price variations, driving forces of fear and inflation has always pushed up the price of gold. 

Looking around at the financial markets today, we see fear has driven the price of gold from around $300 an ounce in the year 2000 to a high of around $1900 an ounce in 2011. The majority of economist never saw the problems coming that are plaguing the world economies today, which in turn are driving up the price of gold. So what drives the price of gold down, you might ask? Supply and demand. As economies get stronger, so does their currency. Gold drops in price when inflation goes away and financial markets stabilize. Investors sell their gold when this happens and invest their money in financial markets that now make profitable gains. This increases the gold supply which can stabilize gold prices and possible drive gold prices down. At this moment, China, India and Russian banks are buying huge amounts of gold. The U.S. and European economies are declining because of problems that may take years to resolve. Gold has and always will be the safe haven during these times of economic troubles.

The Asian banks know what is coming and even though gold prices today are at their highest levels we have seen to date, this has not dettered their banks from buying massive amounts of gold. So, what drives the price of gold up? Again, supply and demand.

How much gold has already been mined and how much more gold can be extracted to keep up with the supply and demand? The fact that one ounce of gold sells for well over $1600 today can help shed some light on the amount of gold available to the world markets. Gold mining companies agree that it takes about $800 for them to produce one ounce of gold. Statisticians have deducted that all the mined gold available today in the world can fit into a 20 meter cube; that is roughly 65 feet high, wide and deep. If that is all the gold there is, then, what will happen to the price of gold, is our economies will sink further into the abyss.

Printed money is basically an I.O.U. furthermore, history has shown that printed currency  devaluated or even became worthless in times of financial turmoil.  Gold will fluctuate up and down in the short run, but in the long run, gold has steadily outperformed stocks since the mid eighties. The fact is gold has gone up 50% since 2010.

The financial world crisis is so complex and disruptive that governments around the world are scrambling to find solutions to problems that took years to develop and will take years to correct. The steady rise in the price of gold is directly related to these ongoing world problems.

Buy gold now and benefit from the rising value that will see further unbelievable gains in the coming years.