Now May Not Be the Time to Invest in Gold
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Right now, gold is getting a lot of play. This is because gold is surging to record highs right now. Everyone is interested in gold because it has breached the $1,000 an ounce mark — and then gone beyond. Gold is sitting at above $1,060 an ounce right now, even as the stock market rally stalls. And that has many people wondering if now is the right to invest in gold.
Maybe it is, and maybe it isn’t, but if you are thinking in terms of buying low and selling high, you’ve got to be wondering whether or not gold will really go much higher. Gold $2,000? Is that really all that likely? I’m not so sure.
Financial Highway offers some insight today on why people invest in gold, and how they can do so. Here is what Financial Highway says about why people invest in gold:
The US Dollar and Gold move in opposite directions, currently the US Dollar is weak and seems to be getting weaker due to economic policy, most do not see an end to this weakness and believe gold will increase in value because of it.
Inflation protection. In the past gold has been a decent protection against inflation, in high inflationary times gold tends to rise quickly. As the government printed trillions of dollars inflation is inevitable in the future, as inflation hits gold prices will continue to rise.
Not Controlled by Government- Gold is a commodity and the government does not control it, there is only a limited amount of gold available. Current gold production is not keeping up with current global demand for gold, as demand increases so do gold prices.
Of course, these are fine reasons, if they hold true. In the end, it is important also to consider whether or not gold is really likely to move higher. Part of the reason that so many people are interested right now has to do with speculation, and with the hype gold is getting. What happens when investors take a step backward, and no one but the gold bugs are interested anymore?
Here is a helpful video from The Street, describing what needs to happen if gold is to continue its rally.
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October 14th, 2009 at 11:02 am
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