Six Reasons Why You Should Invest in Gold

By Mike Will

If you are looking for a safe and secure investment in today’s volatile world, then you should consider buying gold.  If you are not sure whether it is time to invest in gold, then you should think about the following six factors:

1. World Tensions: Although the Cold War ended in 1990, the world has not become a safer place.  It only takes one or two terrorist incidents to spark regional and even worldwide conflicts that could wreak havoc to social, political and financial institutions.  Gold has always been a safe haven in times of crisis, and we certainly live in a time of crisis.

2. Indebtedness in the U.S. : Most conventional forms of investment depend on the strength of the U.S. economy, and a close look at the economy reveals fundamental problems. One of the biggest of these is over-indebtedness. Americans have taken out second mortgages on their houses, and have misused credit cards running up huge debts. Bankruptcies are up and it is only a question of time as to when this “debt bomb” will catch up with us. Just as gold holds its value in times of political chaos, it is equally strong in times of financial difficulty.

3. Weakness of the Dollar:  The dollar was once thought to be as “good as gold,” but this is no longer the case. We live in the time of a “weak dollar” and as our indebtedness grows, and competing currencies like the Euro get stronger, the dollar will be under even more pressure.

When the dollar declines, the benefit to gold will be twofold: as the dollar value goes down, gold will go up, and foreign investments in the U.S. will decline. This indirectly raises investor's demand for gold.

4. U.S. Trade Deficit: Despite a government policy which is designed to make U.S. exports attractive with a weak dollar, the U.S. imports much more than it exports. This trade deficit puts further pressure on the dollar and clouds the economic future. Once again gold is a hedge against this economic uncertainty.

5.  Gold is actually undervalued: As this article is being written the current price of gold is around $620 per ounce. In 1980 gold was trading at a record of $875 per ounce which is actually more than $2000 if inflation is taken into account. Today's price does not reflect a true unencumbered equilibrium value. Recent calculations put that number at around $740.00 per ounce, thus you can expect gold to rise above its present price level.

6. Rising commodity prices: Including gold, commodity prices have been rising for months. History has proven a disparity between commodity prices and gold does not last long. Continued record oil and energy prices will lead to inflation and higher gold prices.

So, if you have been worried about the current economic and political trends are looking for an investment that will insure your future economic security then it may be time to invest in gold.

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