Have you noticed how investment and business magazines recently started to recommend that people should invest in precious metals such as gold? Why should we be focused on supply and demand of gold? Why the sudden demand for gold as we move into 2016?
Firstly, it’s important to remember that precious metals will always be in demand because they are made from a tangible, valuable substance. Therefore, the new demand for gold is definitely not a unique event.
However it’s important to understand what motivates people to purchase gold in high quantities. The main reason is for ongoing financial security. It’s an investment. Although difficult to believe – it is very possible that a traditional currency could plummet in a few short days, maybe even hours!
It’s actually quite surprising how countries manage to keep their currencies afloat even though they experience massive economic problems. People generally want to feel safe. It makes sense to have a safety net of precious metals to fall-back on in case of a financial meltdown. If there is a global economic collapse, the people with precious metals will have something to trade for survival.
Of course, not everyone who invests in gold is expecting an economic collapse. There are practical reasons for it as well. The value of gold continues to rise on an annual basis and people who are accustomed to trading can make a hefty profit from buying and selling gold. Not to mention the fact that it’s an excellent investment for future generations.
But if those reasons aren’t enough, here’s another: we are running out of gold. It’s a natural resource and it’s starting to become rarer.
In 2010 six new gold deposits were discovered and mined. Since then, there have been no new discoveries. Experts have predicted that we will run out of gold in the next 50 years at the current mining rate.
So the world has a limited supply of gold but a never-ending demand for gold. Approximately 50% of gold is used for jewelry which is sold to countries like India and China. On top of that, the metal is also used in electronics and other products. There have also been rumors that banks have started to shift investments from currencies into precious metals which further increases the demand.
In other words, it seems like everyone is trying to purchase gold before the price sky-rockets. Take a look at any graph for the price of gold for the past few years and you’ll see how the price spikes rapidly for certain years. For example, in December 2005 the price for one ounce of gold was $520. Skip ahead a few years to September 2011 and the price for gold almost quadrupled at $1,800 per ounce. But the price is not always climbing, it fluctuates constantly. When it does drop though – there’s a good chance it’ll be up again in the near future.
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