Gold Makes The Headlines - Again!

Gold is seemingly on a wild run these days. Gold prices have made several new all-time highs this week, and is now well over $1300 per ounce. Investors who got into the precious metal over the past few years have undoubtedly enjoyed the wild ride that has made their investments a lot more valuable than they were just a few years back. And all this while stocks have barely shown any meaningful gains in the same time period!

Gold has always been considered a mainstay of investing because of the intrinsic value of that precious metal. The production of gold worldwide is very limited and nobody can increase the supply of gold substantially in an arbitrary manner. The same is not true of fiat currencies such as the Dollar or Euro because governments can print more money as and when needed (and have done so in the past), increasing the money supply and causing such currencies to lose value.

Because of the worldwide recession, many governments have taken on increasing amounts of debt and relied on deficit-spending to balance their books. This increases the supply of money beyond what the economy can sustain normally, eventually resulting in devaluation of the currency (a phenomenon which manifests itself as higher and higher inflation). This has also resulted in appreciated values for gold and other bullion over the past few years.

The accompanying graph showing the price of gold over the past 5 years illustrates the explosive growth in gold prices because of turmoil in economies throughout the world. During this time period, budget deficits and trade deficits have gone up causing countries to prop up their economies by trying to increase their money supplies, resulting in devaluation of currencies and a run-up in the prices of real assets such as gold.

The trend has continued to this day, and all indications are that it is not likely to stop anytime soon. All this bodes well for continued appreciation in the price of gold going forward. Buying gold or other bullion coins (such as silver, platinum, and other precious metals) enables you to take advantage of the upward trend in the price of gold for your long term investment gain.

In addition to purchasing gold bullion in a regular investment account, you can also set up a gold IRA that allow you buy gold to tap the potential of the yellow metal in your retirement account. As part of building a well-diversified investment portfolio, you need to start checking out gold and other precious metals, and incorporate them into a well-rounded investment strategy!