Gold Hits Its Highest Level In 8 Years – Should You Buy


Gold Hits Its Highest Level In 8 Years – Should You Buy?

On June 23rd 2020 Gold prices closed at their highest levels since 2012.

Why?

Because people fear the US dollar will “weaken.”

I explain what this really means later.

But this after prominent economic Stephen Roach of Yale University said he expects the US dollar could fall at “warp speed” in this coronavirus crisis.

He also said he sees a 35% decline in the value of the US dollar due to the “nations increasing deficits and dwindling savings.”

What does this have to do with gold prices?

A lot as you’ll see below.

But before we talk about that I need to show you the price history of gold.

Since the US left the gold standard in 1972 prices have mostly gone up as you can see in the chart below.

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Gold sold at $66.90 per ounce in February 1973 shortly after it became legal for individual Americans to buy gold again. And it now sells at $1,769 per ounce as of this writing.

This is a 25.4X or 2,540% increase in 47 years.

This is fantastic of course. But is also a bit misleading.

Most of these returns of gold happened from 2005 to 2020.

Why?

Because of the explosion of US government debt in the last 15+ years. Debt that now stands at an estimated $26.2 trillion.

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In the last 20 years alone President Bush #2, President Obama, and now President Trump added a combined $19.3 trillion to the US federal debt in the last 20 years.

Before this, it took us 224 years to build the national debt to $6.9 trillion.

The debt explosion of the last 20 years is unsustainable.

And its leading many experts to warn that the US dollar will weaken substantially in the coming years.

I mentioned this term above but what does it mean?

When you see the term weakening when it comes to talking about currency it means people expect the dollar to lose value.

This is horrible.

When a country’s currency loses value it means the country can’t buy as much due to the lower value of the currency. And it also means the country has less economic power.

But this isn’t just bad for governments… Its bad for all of us.

If US dollar crashes as predicted by professor Roach, it will make everything we buy more expensive.

Products, services, food, vacations to foreign countries, everything.

To hedge against this, people buy various hard assets like gold, silver, and now crypto currencies.

For this article we’ll stick to gold only.

The US debt explosion in the last 15 years is why gold prices also exploded.

Because more and more people in the US and worldwide expect people to “lose faith” in the US dollar due to the huge debt loads.

The term losing faith when talking about a currency means people don’t think it will keep its value.

If people lose faith in the currency is price and value go down. And this leads to the bad things above.

So, with gold hitting its highest levels in 8 years and US debt going even more out of control with the coronavirus should you buy gold now?

Possibly, yes.

This depends largely on your long term investment goals but what I usually recommend to people is that if you think the dollar or the entire economic are going to crash to invest 5% to 10% of your portfolio in gold.

Investing this amount in gold hedges you against any kind of major collapse of either the dollar or the economy. While it also leaves room to invest in stocks and businesses.

These have more upside potential because they’re assets like gold. But because they also produce cash flow on top of this.

I’ll write more about this in a future article.

Is the US dollar likely to crash in value at some point due to the ever growing and enormous debt levels?

Yes.

These debt levels and yearly increases are unsustainable.

But I have no idea when any crash in the dollar will happen.

It could happen later this year if coronavirus cases keep spiking worldwide and the US continues to support America with more debt.

Or it could happen in 30 years.

Or it could never happen in our lifetimes.

No one knows.

But it pays to protect yourself.

Gold is one asset you should look into to protect your investments. Especially with all the craziness going on right now related to the coronavirus that we’ve talked about in some of our recent articles.

29.1 million Americans Unemployed

Millions of Americans Are Now Longer Paying Their Bills

• And new coronavirus cases spiking worldwide in recent days.

To find out another way to protect you investments check out our recent article – 3 Stocks That Will Earn You High Returns In The Coming Depression – to get more ideas about how to protect your wealth.

Always In Your Service,

Chief Editor – Jason Rivera

 


 

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