Indeed, James Rickards starts off with a little background to help understand why there is a definite possibility that gold gets to $10,000/oz.
Is gold a commodity, an investment, or money? The gold price tracks the ups and downs of commodity indices. At other times, gold is viewed as a safe haven investment.
At other times, gold is viewed as a safe haven investment. It competes with stocks and bonds for investor attention.
And on occasion, gold assumes its role as the most stable long-term form of money the world has ever known.
Whether you have some exposure to gold, or not, it is important to understand the relationship between gold and other currencies pulled out of the ether at government’s will.
This is great news for those with price exposure to gold. The price of gold in many currencies is going up as confidence in those other currencies goes down. Confidence in currencies is dropping because investors are losing confidence in the central banks that print them.
Gold’s role as money is difficult for investors to grasp. One criticism of gold is that is has no yield. Gold has no yield because money has no yield. In order to get yield, you have to take risk.
You have to keep in mind that while gold doesn’t generate a yield, it also doesn’t generate a negative yield as we are currently seeing in many countries in Europe and around the world.
Of course, negative yield begins the distrust cycle with fiat currencies (government generated money).
Lost confidence in fiat money starts slowly then builds rapidly to a crescendo. The end result is panic buying of gold and a price super spike.
We saw this behavior in the late 1970s. Gold moved from $35 per ounce in August 1971 to $800 per ounce in January 1980.
Many stories have chronicled lately concerning the sale of gold by many of the “western” governments, along with the almost “wholesale” purchase of gold by Asian and Eastern European countries. They have experienced the cycle that the western countries seem to be on the precipice of experiencing, with or without their realization.
It really comes down to the simple fact that:
Gold will be in such short supply that only the central banks, giant hedge funds, and billionaires will be able to get their hands on any. The mint and your local dealer will be sold out. That physical scarcity will make the price super spike even more extreme than in 1980.
And, if you don’t want suffering from the loss of value that your fiat, government-issued currency will experience in the near future, then you need to follow Jim Rickards’ advice.
The time to buy gold is now, before the price spikes and before supplies dry up.
Though it is not yet apparent enough for the mainstream media to be talking about the loss of confidence in the currencies, there are signs for the aware observer that abound.
Right now, investors around the world are losing confidence in Chinese yuan, Saudi rials, South African rand, Russian rubles, and a long list of other emerging market currencies. Investor preferences are shifting toward gold. This accounts for gold’s outperformance of the rest of the commodity complex when measured in dollars.
This is especially true if you’re one of those individuals who believe that the world will always need the dollar. You only need to look as far back as the “British Empire” to see that nothing last forever, including their currency as the basis of world trade.
It’s important to take off your dollar blinders to see that the dollar is just one form of money. And not necessarily the best for all investors in all circumstances. Gold is a strong competitor in the horse race among various forms of money.
These are only a few of the points expressed by Jim Rickards in his recent article. If you would like to explore the rest of his argument, you can read more at dailyreckoning.com
As Jim has pointed out in his article and I’ve noticed from watching the USD Index, the dollar has begun slipping from its leader-of-the-pack position. Many other currencies are not faring very well either.
For the most of 2016, the price of gold has been inching it’s way up. It actually began before the dollar started its decline.
It is time, as Jim Rickards has suggested to buy some gold before the price skyrockets. And, if you’re don’t have the ability to buy gold at this time, you can always buy some of the poor man’s gold (silver). I would actually suggest that you consider the silver over the gold simply because of it’s historically aberrant relationship to gold.
[It should be noted that I am not a licensed commodities broker. I present the information for educational purposes only.]