Here’s an astoundingly simple and compelling reason to believe gold can’t go much lower
The price of gold has been up and down in the past few years. We know this. For some – especially those who are looking for a quick return on an investment – that can be problematic and shake their confidence. For our clients, however, they understand that precious metals are highly regarded as a long-term safety net. Gold is for the long haul. Gold – and especially physical gold – is not for day-traders or anyone who thinks of it like a stock, to buy and sell on the slightest of changes in price. Gold is for protection; its highest and best use is as a long-term hedge against the ravages of inflation.
Many who understand gold also know that there has most likely been some manipulation of the market. There are a number of reasons to believe this is happening, but the most nefarious could be to destabilize gold purely for the reason of destroying confidence in it. This would serve to keep the less-informed away from precious metals and to encourage them to stay in fiat currencies, risky Wall Street stocks, and the bonds of bankrupt governments. Sadly, the effort to shake confidence in gold often works. It scares a lot of people. The average person gets spooked and thinks of these dips and fluctuations as reasons that gold is a “bad” investment. The average person misses the point that gold is not like other investments; in fact, gold shouldn’t even be viewed as an investment – gold is protection.
But not everyone is spooked. Probably not even most people. Certainly not our clients. And certainly not most people in the rest of the world. Entire countries and continents worth of people “get it”. Demand is steadily rising for gold in India, where import restrictions are easing. Demand is also strong in Russia, where they might be looking to abandon the dollar altogether. And of course demand is strong in China, where they might want to eventually back a regional reserve currency in gold.
And so even if there is price manipulation, the demand for gold is strong enough to make it ineffective to manipulate gold prices over the long term – even for the Federal Reserve. Manipulation can’t go on forever.
And now, there is reason to believe gold has reached its floor. Does gold have a floor? Well, very possibly.
Here’s what we know:
The spot price of gold today is around $1,250, close to a 16-week low. It is close to reaching a critical low point of $1,200 an ounce, which is significant because that is the average amount it costs to get gold out of the ground these days. When it costs more to get gold out of the ground than it’s worth, guess what? Mining companies stop mining it, at least for a while. They aren’t charities. That halts supply. But if demand continues to be steady and rise, the price will likely adjust and go up from there. Mining companies won’t pick back up until they can sell at a profitable price.
There’s more: All the inflation of fiat currencies around the world is also inflating mining costs, such as labor and capital equipment. So there is good reason to believe that the $1,200 that it costs on average today to mine an ounce of gold will cost more tomorrow. Which means that over time, tomorrow’s floor should be higher than today’s floor.
“Buy low, sell high.” We all know the saying. You can’t get any lower than a floor.
If you too have strong reasons to believe you’re seeing the floor, don’t wait any longer. To get started, give us a call at (800) 355-2116 or get your no-obligation investment kit right here.china, Featured, federal reserve, gold, india, inflation, russia