In the current economic climate more and more people are choosing to invest in gold. Of all the precious metals, gold is the most popular as an investment today. Gold is generally bought as a hedge against inflation, currency based crisis, political unrest and during War. Here are the 5 critical reasons to be investing in gold today.

1. Gold is more than just a Commodity. It is ‘Money’.

Gold has been used as ‘money’ in the marketplace for the last 5,000 years. It was the main source of money used in Europe, Asia and America up until 1971 when President Nixon took it off the gold standard and the dollar was no longer redeemable for gold. Since then all the worlds ‘currencies’ known as ‘fiat currencies’, (no more than just paper) have not been redeemable or accountable to anything and the government were free to create as much currency as they liked.

2.Supply and Demand.

While mining companies continue to extract gold, current production cannot keep pace with demand. Unlike with the dollar you can’t just ‘print’ gold. It takes roughly 8 years to get a gold mine from the initial drilling into production. From just 1992 to 2005 world output totaled 1.1 billion ounces. Today reserves are barely half that size, and dwindling. Large mining companies are finding it difficult to keep up with production, turning to the junior companies for exploration and discovery. But between just 1985 and 2003 new discoveries has fallen by 30%. Basic economics tells us that when supply cannot meet demand, the value increases.

3.Massive Recent Currency Creation.

We are now coming up to $1 trillion of new currency that is being pumped into the economy. There has been more currency created in the last 12 months than has been created in the last 200 years!!! Gold has a negative correlation to the dollar. This means as the dollar continues to fall, the value of gold will increase. In the last precious metals bull market of the 1980’s gold went up 24 times in value to $850 per ounce. In fact today, measured in real terms, (adjusting for inflation) gold would have to surpass $15,000 per ounce to do what it did in the last gold cycle and that was without the recent government stimulus’s and bailouts.

4.Inflation.

Inflation is basically the rise in prices for the goods we consume, but what many people do not understand is that it is caused by currency expansion. Every time a new house is bought, as soon as you sign your name on the mortgage, new currency has been created. The same is with credit cards. As we have seen earlier the massive recent currency expansion of all the bailouts for institutions like fanny mae, Freddie mac, AIG and the Banks, the currency supply has never seen such an explosion.

5.The Investment Demand for Gold is Accelerating.

China has recently increased its gold supply 11.4% to 89.6 tones, compared to the same period last year. India imported 41 tones of gold in July alone, up 7.6% from 38.1 tones imported a year earlier. Despite the fact that there has been a dramatic pick-up in investment demand for gold the average American citizen is still barely aware of gold’s attraction….yet!! When the general public begins to move into gold, the price will skyrocket.

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