Gold is undervalued. Why? The main reason is inflation. Rising prices eat away at your income and purchasing power whether you know it or not. Gold that sold for $850 per ounce in 1980 would be worth approximately $4,000 to $5,000 today when you adjust for inflation. So Gold today is a steal by historical standards. Another way to determine the real value of Gold is to compare it to the stock market. In October of 2007, Gold was selling for roughly $750 an ounce. Meanwhile, the Dow Jones Industrial Average soared to approximately 14,000. Do the math. This means you needed 18.66 ounces of Gold to buy the Dow. Now fast forward to the present. If Gold sells for about $1600 an ounce while the Dow trades around 13,000, then it only costs 8.12 ounces of Gold to buy the Dow. It’s just one more reason why Gold is cheap by historical standards — and why Gold will continue to rise.

Gold is a life preserver for investors when prices rise and currencies decline as well as during periods of economic crisis. With the United States and other nations now printing money to spend their way out of recession, conditions are ripe for rising inflation and a declining dollar. That’s why more and more investors are going with Gold to protect and grow their wealth.

Demand for Gold is growing. It’s not only because smart investors are turning to it as the best way to protect and grow their wealth. There are many other reasons as well. Demand for Gold is also rising because millions of people in China and India are buying Gold as they join the ranks of the middle class at an unprecedented rate. Meanwhile, many central banks are buying Gold as a way of reducing their exposure to a declining U.S. dollar. That’s what’s happening on the demand side. Now consider supply. Gold mines can’t dig enough of the stuff out of the ground to keep up with rising demand. It’s Economics 101. It’s supply and demand. The conditions are now in place for Gold to spike.

Wel believe gold should be considered as an investment for the clients of wealth managers. Richard W. Davey Organization is a consulting firm that helps wealth managers of financial institutions purchase gold bullion on behalf of their clients.

Via EPR Network
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