A series of recent reports and comments from public figures all point towards gold’s continued dominance as a time-tested store of value. Can anything beat it over the long term?
From Filip Karinja, for Birch Gold Group
Conventional wisdom suggests a strong dollar is bad for the price of gold. So given the dollar’s current relative strength against other currencies, we should expect the price of gold to fall, right? Not so fast, says a new report from the World Gold Council (WGC).
Released in the past week, the WGC has revealed findings that while there used to be a seesaw relationship between the value of the dollar and gold, as the world shifts towards multi-currency systems and looks to the east for economic strength and stability, this may no longer be the case.
The analysis confirms what we’ve been reporting here in recent currency trends, with the Chinese yuan gaining global power and an increasing number of countries turning their back on the dollar and entering bilateral trade agreements.
Plus, don’t forget that China is set to launch a yuan denominated gold fix later this year. This will only further reduce the dollar’s influence on the price of gold, which is already diminishing due to a massive uptick in demand from emerging markets.
This week also brought what may be the largest bombshell of all for the future of gold… and it has nothing to do with geopolitics: According to Goldman Sachs analyst Eugene King, there is only 20 years of mineable gold left on Earth. In addition, King has predicted that 2015 will be the year of peak production for the increasingly rare and precious metal.
A physical shortage in the market in the not too distant future seems all but certain, with the increase in scarcity to likely act as a price support for the metal.
Some argue that even if we indeed run out of minable gold, there is still a huge amount of available supply because much of the world’s gold is not used for perishable purposes. But do you want to tell your wife that her wedding ring is part of supply?
What’s more, gold is generally valued in terms of the U.S. dollar. But what happens if the dollar, which is backed by nothing and can be printed out of thin air, is no longer considered valuable or the premier currency of the world?
The sky then becomes the limit for the value of gold. And just as the metal has proven for over 4,000 years, it will continue to retain its status as the world’s unparalleled store of value.
Even those who are supposed to be dollar advocates are turning their backs on the dollar as a store of value. Current Federal Reserve Chair Janet Yellen recently admitted exactly this. And late last year, when asked if gold was a good investment, former Chair Alan Greenspan said:
“Yes. Remember what we’re looking at. Gold is a currency. It is still, by all evidence, a premier currency. No fiat currency, including the dollar, can match it.”
So there you have it: The current Fed Chair announcing that cash is trash, a former Fed head saying gold is superior to all fiat currencies (including the dollar) and Goldman Sachs reporting that gold not only holds its value over time, but is also facing extinction in 20 years.
The writing is on the wall for all to see: Once free market forces of supply and demand take over from current central banking policies and government intervention, gold will inevitably win out to all fiat currencies as a store of wealth.
It’s only a matter of time. Have you protected your savings?
Have you watched our interview with Steve Forbes? If not, you can see it here.