Invest in gold before the pending inflation
Why invest in Gold?
Gold is in a bull market because its core fundamentals are so outstanding. The gold price, like every other commodity or stock, is ultimately driven by supply and demand.
Each year all of the gold mines in the world combined are able to scrape about 2,500 metric tonnes of the yellow metal out of the bowels of the Earth. This mined gold supply, however, is utterly dwarfed by growing global demand for gold. The best estimates today indicate that the whole planet buys 4,000 to 5,000 metric tonnes of gold each year. Global gold demand exceeds global gold supply by 60% to 100% annually creating an acute structural shortage situation. For many years various central banks around the world, other countries’ equivalents of the US Federal Reserve, were willing to sell enough gold into the open markets to more than cover the huge structural supply deficit between mined supply and world demand. For most of the time since the mid-1990s this marginal supply of official gold flowing from central bank vaults was enough to more than offset the gold deficit each year, keeping gold prices from rising to fundamentally resolve its structural deficit. Since early 2001, however, the gold price has been relentlessly running higher indicating that central banks are no longer selling enough gold to make up for the global demand above the mined supply each year.
Since 2008, gold stocks have been steadily pushed higher due to fears of inflation. The various bailout packages and excessive recent government spending will inevitably put an excess of cash into the economy, thus, driving the value of the dollar down. It appears as if gold is at a new high in May after the March/April rally, but inflation has not yet been priced in. Even more substantial declines in world markets have kept the dollar strong in comparison and have prevented short-term inflation. Most of the bailout money has also yet to reach the middle class.
Discussion
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