Many investors have been questioning the sanity of gold prices that are returning virus-inspired gains despite continued reports that the US dollar is strengthening. I believe that this is because the world is shifting its resources from paper money into physical assets that can hold their value over time.
A good example of this is gold’s increasing demand due to a perceived increase in the value of silver. This silver is seen as a hedge against inflation, a general protection against future governmental and central bank stimulus measures and the possibility of a new global financial crisis. Gold is seen as a safe store of value, and with gold prices now rising, it is more popular than ever.
If gold prices increase as a result of increased demand and the belief that gold is a safe hedge against inflation, why would people change their minds? The reason is simple, as everyone knows, once the price of paper money increases, so does the supply of money in circulation.
That’s what is happening right now with paper money. In the wake of the recent interest rate hikes by the Federal Reserve, the market seems to be seeing the double whammy – both inflation and the possibility of another big financial crash. Now more than ever people are thinking about assets that can protect them from future threats.
The next asset that has become increasingly popular is physical assets like gold, silver and platinum. Gold is the ultimate hedge against inflation, a safe haven against a possible economic recession, as well as being used as an investment and a store of value. What better way to protect against inflation, besides with gold, which many consider the “gold standard”?
Investors, especially those who have a passion for investing, are embracing physical assets as the best way to protect themselves from future economic threats. But is this trend starting to reverse and is gold getting the blame, after all, if the US dollar fails, then everyone loses? The answer is no.
I have some news for those who are concerned about gold prices, and they are probably the ones who are trying to put a stop to the virus-inspired gains. The big question that must be asked is: Why is gold suddenly becoming popular again as an investment, when the US dollar is on the rise?
Well, we have two answers, one related to the current financial crisis and one that have to do with the fear of inflation due to the weak US dollar. Let’s look at each in turn.
When the weak US dollar is coming off of a hard economic recession, the focus is to protect one’s savings, while still maintaining a solid currency. The key is to have a strong, stable and liquid asset that is secure and not a currency that gets so weak that it cannot protect your wealth.
Unfortunately, the weak dollar is not there yet, although it will be eventually. So, those of us who have safe and solid assets like gold have to be careful about selling or buying. Yes, people are re-considering the value of gold, because they see the US dollar as a weak currency and need a way to safeguard their wealth.
The other reason gold prices are returning to normalcy is because of the perceived increased value of silver. For years, gold was perceived as a “safe haven” and was thought to have great value against inflation, but after the economic crisis, people are realizing that the same things hold true for silver.
Unfortunately, the international event that has caused the price of silver to spike is not over yet. However, that doesn’tmean that the virus-inspired gains that have been seen are going to return. return anytime soon.