Gold Per Ounce – Core Truths Via The Extensive Report
posted by admin inGold Per Ounce Levels Rising Against Inflation A weak currency is only one potential problem. Inflation is a huge component, especially when you consider the threat of hyperinflation. The allure of compound interest loses its appeal if you find that the interest rate is lower than the pace of inflation. It does little good to earn 5% on your money if inflation is at 7%. In such a case, it doesnât make any difference that gold doesnât pay interest. Interest is not serving you well anyway. If a currency is decreasing in value, relative to other currencies or through inflation, the price of gold per ounce can increase. What this means is that holding wealth in currency can be detrimental. Storing wealth in gold can offset the negative effects of inflation, if not put you in a winning situation. A 50% rise in goldâs price can make inflation at 5% seem like a mere bump in the road. Gold Per Ounce â Inflation v. Interest Rates The analysis gets even more interesting when you have inflation and interest rates intersect. For instance, letâs say that interest rates are near zero, which has been the case. Inflation is nowhere near zero. What that means is that anyone holding wealth in currency, even aside from a devalued currency for a host of other reasons, is already losing ground. Simply put, the same number of dollars tomorrow will be worth less than those dollars today. Inflation will see to it that you cannot purchase as much tomorrow at higher prices as you could today. In short, the factual interest rate is less than zero. When the real interest rate is a negative number, the situation is horrible for fiat currencies and spectacular for gold. Gold Per Ounce Predictions And The Recipe For Perpetual Price Hikes An interesting study showed that negative interest rates create an environment where gold does really well and stocks to poorly. To summarize these impressive findings, note that there was a real median interest rate of negative 1.15% between 1973 and 1980. Gold was up 32% a year, while the S&P 500 dropped 7% each year on average. By contrast, consider 1981 to 2001, when the median interest rate, adjusted for inflation, was 2.7%. With a positive real interest rate, note that gold was down 3.5% each year, while the S&P 500 posted 7% annual gains. From about 2002 to about 2009, there was again a negative real interest rate, this time about -.4%. Gold has been up 18.5% while the S&P has been down about 3% per year. When people realize that actual negative interest rates cause you to lose money to inflation alone, itâs easy to see why gold per ounce prices will continue to rise. As the factors supporting causing inflation to outpace interest rates seem unlikely to end any time soon, the cost of gold per ounce is only likely to increase into the foreseeable future, especially as people seek refuge in gold and silver funds.
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