by Jeannette Di Louie, Investment U Research
Monday, November 28, 2011
Forget the Gold Rush of 1848, which sent people scrambling from the East Coast to the West in search of the yellow metal.
That was nothing compared to the global financial frenzy gold’s causing these days.
It seems like everyone has gold fever…
From emerging markets to established economies, big corporations to individual investors, and young professionals to well-off retirees – nobody seems to be immune to the contagion.
In China, for example, gold demand could increase 10 percent this year if it continues to meet the estimates last set in September. That would take it from 706 metric tons in 2010 to 776 metric tons in 2011, a significant leap for any commodity.
Cross over to India and you’ll find that gold-related funds, which were worth about 35.2 billion rupees last year, shot up by triple digits.
And it shouldn’t need to be mentioned that American and European investors are salivating over the precious metal, considering the state of their economies and, subsequently, their currencies.
But is the hype perhaps a bit overdone? That remains to be seen…
BullionVault Predicts $3,000-Plus Gold
BullionVault, the self-proclaimed “World’s No.1 Gold Investment Provider,” is an excellent example of just how focused investors everywhere are on gold. The company recently reported impressive profits after it saw demand for physical gold double in the past year.
That kind of demand has pushed prices from near $1,350 per ounce this time last year to somewhere around $1,700 per ounce today. Yet gold still “remains materially under-valued,” BullionVault’s website boldly proclaims.
CEO Paul Tustain thinks it’s worth something closer to $3,844 per ounce at today’s inflation-ravaged prices.
Years ago, it would have been easy to dismiss that kind of claim as ridiculous. But then again, years ago, the world’s largest economies didn’t understand their insolvency the way they do these days.
Also, years ago, China wasn’t the quite the rising powerhouse it is today, with its quickly expanding middleclass that wants it all, including gold jewelry, gold investments and all of the useful gadgets that rely on gold pieces. Likewise, India and Brazil were only blips on intrepid investors’ radars, instead of pools of new consumers ready and willing to spend.
Don’t Bet It All on Gold
Of course, new consumers aren’t really the issue in the United States, Europe and other established markets. If anything, it’s just the opposite.
The aforementioned Tustain perhaps summed it up best:
“The major driver of growth [in gold prices] has been the steady realization among private savers that low interest rates are here to stay. Central bank statements have confirmed their fears. Savers rarely regret the decision to steer clear of governments which address economic problems by printing money.”
So gold and other precious metals seem like the next logical choices to invest in.
Even young professionals in their 20s and 30s are afraid of the immediate present and what it means for their future. MarketWatch issued a report recording how the age group sees gold as a good bet against losing out like they did in the 2008 financial crisis.
Let’s face it: They’re more than likely right. But while the precious metal is probably undervalued (and the dollar and euro highly overvalued) and demand just keeps rising, it’s still important not to put all your eggs into one basket – even if it’s a golden one.
Yes, common market wisdom says that gold is going up. But common market wisdom has fallen short before and will most definitely do the same again.
That’s why Investment U recommends its specialized Asset Allocation Model, which helps investors manage their portfolios wisely for maximum long-term potential and minimum disruptions.
Jeannette Di Louie