Ask most kids these days if they want to receive gold as a gift, you may get some to say yes. But some may say to just give them some Bitcoin or crypto or some type of digital item like a game, or something they can use. Somehow the allure of this precious metal isn’t really that attractive to young people today.
Gold has been holding its spot price at the $2,000 per ounce level this April 2023.[1] Some gold fans forecast it may go up to $3,000 this year or next year, because of the combination of high inflation and low growth if a recession hits.
Gold has had a long history since ancient times. It has industrial uses, and is used even in medical and food applications. Of course, one popular application is in jewelry. Another is as a store of value, and until 1971, the basis of value for the US dollar until US President Nixon took the dollar off the gold standard.
But a high US debt of over $32T not counting off balance sheet expenses versus low GDP, tax collections, and productivity has made gold popular again with some investors. The failures of Silicon Valley Bank, Signature Bank NY, First Republic, and Credit Suisse has made some depositors pull out their money from almost zero interest rate savings and checking deposits, to money markets and treasuries that pay around 5% as of May 2023.
Although the stock market still seemed resilient this April 2023, many experts are forecasting a large correction, even a significant crash. Because stock prices are often a multiple of the price to earnings (P/E ratio), these high prices are expected to crash when the recession actually hits and earnings are lower because people and companies have less money to spend. So many experts caution against investing in stocks at this time except for a few in certain unaffected sectors.
Plus with a looming showdown over the high US $32T debt, and with a remote possibility of default, plus developments with the BRICS nations over the Petrodollar have made some people totally consider non traditional investment vehicles like gold and Bitcoin, and not just bonds.
For some however in the mainstream, even if Bitcoin is being called digital gold, they aren’t prepared to make that jump to digital yet.
Because of this, gold is enjoying a renewed popularity as shown by its current spot price. One thing with gold though is that when the spot price rises, miners want to dig more out of the ground. Hence if the supply increases, that acts to dampen price.
However one demand driver is also the desire of the BRICS countries to overthrow the US dollar as the global reserve currency. While it may take a while for them to do that, it has been reported that China is buying a lot of gold to backup that new BRICS currency.
For people interested in investing in gold, there is paper gold. This means that the gold is stored somewhere, and you receive a certificate that shows you own that gold. However, one needs to ensure that the paper has a one to one relationship with the actual precious metal, else there will be several holders of the same gold amount. Similarly there are certain cryptocurrencies that give you ownership of physical gold, normally in one ounce increments, that is safely stored somewhere.
Then there is of course physical gold that you acquire, either in bullion bars, in jewelry form, or in coins. If the gold is in coin or jewelry form, then other factors may affect the price such as the historical significance of the coin or the design of the jewelry. In any case, one concern and expense is the proper secure custody and safekeep of this gold, especially if it is in large amounts.
Despite its long history dating back thousands of years, gold has not done well as an investment in recent years. However with the financial conditions occurring at the moment in world history, it appears that these shiny Boomer rocks may regain its place as a popular investment instrument for the next few years to come.
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