There are so many charts showing a long-term connection between various forms of money and gold. Most of them show that one can outperform than others until those left behind can catch up. This article will zero in various current circumstances such as the US expansion of the monetary base after the financial crisis that started in 2008.
The performance of international gold prices since the 2008 crisis show that the increase will continue given that the trend will continue until 2014. At the beginning of 2014, if the same trend shows, gold price will reach at a point of $2,300 or a 30% increase in the last fifteen months. During the end of 2014, there is an average increase of $2,500 per ounce or 40% increase than the current prices.
Some economists argue that there is no such law that says the correlation will continue. Yes, that is true but it is possible based on historical data and current trends. In addition, the US is not the only country that is experiencing this trend. The largest economies all throughout the world are devaluing their currencies too. This move is not free from consequences, in fact the direct beneficiaries will be the industry of gold and silver together with the mining companies that are starting to increase prices.
When the price of gold will hit $2,000, there are advantages and disadvantages that investors must be prepared, the following are:
- Tight supply. As the price of gold increases, it will attract more investors. The problem will be the tight supply and getting gold bullions can be very difficult to find. As a result, delays of delivery maybe the most common scenario. Those who are still waiting to have sufficient amount of gold may wait for a longer time.
- Premiums will increase. If there is a tight supply of gold, the commission will be higher than the usual rate. In 2009, the premiums doubled and markups reached 100% for Maple leafs and silver Eagles.
With the current trend of international gold prices, there is a greater demand of gold in the succeeding years to come.