The US stock market reached a recent high, and some would say the recession is now over and it seems like America is on it’s way to economic recovery. However, if this is all true, then why would the Federal Reserve be purchasing $85 billion in bonds for printing money every month? Ben Bernanke, the current Chair of the Federal Reserve, recently announced that they would be doing just that and keeping interest rates near zero until unemployment falls to 6.5%. Unemployment is currently at 7.7%.
The amount of circulated US dollars has been tripled in the last five years. This of course, indicates one thing for sure – Inflation. Outside of the US, other countries are following suit, which has been referred to as “quantitative easing”. As of 2012, the US deficit was estimated to be close to $1.1 trillion, with a debt of $16.4 trillion. There doesn’t appear to be a game plan to resolve this issue, either.
The US dollar, like any flat currency, has a shifting valuation over time . During periods of rapid inflation in a country, a nation’s currency might drop in value considerably. Throughout these circumstances gold and precious metals become even more valuable simply because gold holds it’s value (or even increases) while paper money drops in value. Governments and investors the world over tend to increase their investments in gold whenever a country has a major change in it’s government, a change in regime, or goes bankrupt.
Gold will always be valuable and cannot be debased by a government that has gotten into an economical mess. Gold has gone up in value every year for the past thirteen years, and it continues to perform better than other countries currencies, like the Euro, British pound, Canadian dollar, or Swiss franc. While it is true that the cost of physical gold has gone up over the past few years, it is now easier than ever to invest due to programs available online to essentially anyone that is interested that has the money to do so. Having gold in your investment strategy is an essential part of a well-rounded portfolio.