Many Greek residents are having to use their savings to pay routine bills because the economy there is so terrible; they are also facing rising taxes and financial uncertainty. As a direct result, Greek banks are having to reduce their lending—thus worsening the recession in that country. Money in Greek savings accounts has decreased 30% in two years. And it’s a situation that could happen soon in Spain and Italy.

Financial and political leaders in Europe are seriously starting to consider printing money as one way to get out of the crisis. This would start once Italy, Spain, and other countries adopt austerity measures. While this will provide some much needed liquidity, it also poses the threat of inflation. And when there’s a serious threat of inflation, then it’s a good time to buy gold. Historically, gold has been one of the most effective ways to protect savings from inflation.

And there’s absolutely no guarantee that printing money will solve the crisis.

“When there’s concerted action by central banks, it’s definitely good,” Jens Sondergaard, senior European economist at Nomura International told Bloomberg. “But are liquidity injections a game changer when the heart of the problem is in European sovereign debt markets?”

A further problem on the horizon is the potential downgrading of credit ratings for 15 out of the 17 Eurozone countries.

“We are therefore also placing the ‘AAA’ long-term rating on the EU on CreditWatch negative,” announced credit rating agency Standard and Poor’s.

And it’s understandable. Italy is precariously close to defaulting on its debt of 1.9 trillion Euros. If even one of the current Eurozone countries decides to stop using the Euro, this decision could create a financial catastrophe by triggering sovereign debt defaults across Europe. The choice is stark. Several European countries will have to accept Greek-style austerity measures or the European Central Bank will have to print Euros.

There’s a reason the United States is extremely worried about the Eurozone crisis: many U.S. banks guaranteed European sovereign debt; if there’s a default, then the U.S. government would have to bail out their banks again. To achieve this, the U.S. Federal Reserve would likely have to roll the printing presses and print more money. Again—this significantly raises the threat of inflation.

It’s a mess. And the crisis in Europe is one of the main reasons to buy gold. Right now, it looks like there will be two major problems in Europe: inflation and continued economic uncertainty. Both make buying gold attractive as gold thrives during times of uncertainty and when there’s inflation.

• Qatar has been buying more than a ton of gold every month for three years.
• Russia recently bought more than 15 tons of gold from its mines.
• The Reserve Bank of India bought 200 tons of gold the IMF sold.
• Even tiny Mauritius bought 2 tons of gold in November.
• And then China plans to buy gold: approximately 6,000 tons in five years.

It’s not easy to find this sheer quantity of gold. The supply of gold remains low. New mines are opening but it takes at least five years for a mine to produce at significant levels. With high demand, low supply, and a volatile global market, there’s a good reason that many commodities analysts are predicting significantly higher gold prices for 2012.

• UBS has forecast $2,075 an ounce.
• Barclays has forecast $2,000 an ounce ($35 an ounce for silver).
• Morgan Stanley predicts a range between $1,819 an ounce and $2,085 an ounce.
• HSBC predicts $2,025 an ounce.
• TD Securities predicts $1,975 an ounce.

With the price of gold hovering around the $1,700 an ounce mark for several weeks, it may be a good time to buy gold.

Five Factors Pushing Demand for Gold

1. The financial crisis in Europe over the Eurozone—which looks increasingly likely to lead to printing money…and inflation.
2. Central banks are buying gold as they move away from the dollar.
3. There’s strong demand for gold for jewellery in China, India, and the Middle East.
4. Institutional investors may start buying gold—especially if global equity markets remain stagnant.
5. The spectre of inflation—not just in Europe but all over the world.

With gold prices at approximately $200 an ounce below the high in September and many major financial institutions predicting prices over $2,000 an ounce in 2012, now could be a good time to buy gold.

In the short term, it will be extremely important for people who are considering buying gold to pay close attention to the news coming out of Europe.

“We expect gold prices to increase because of fear of a Eurozone implosion,” said Dennis Hynes, chief market strategist at R.W. Pressprich, told Bloomberg. “The only currency that’s stable in this type of situation is gold.”

The factors:

• Consistently strong demand for gold from India and China.
• A weak dollar.
• Continued uncertainty (and turmoil) in global equity markets.
• No resolution to debt woes in the United States.
• The Eurozone crisis.

If anything, the demand for gold from India and China has increased and the economic situations have worsened.

At the beginning of the year, certain ‘experts’ were optimistic about the economy. In front of the Senate Budget Committee, United States Federal Reserve Chairman, Ben Bernanke, said the U.S. economy was going to be “moderately stronger in 2011 than it was in 2010.” He went on to predict rampant growth between 3% and 4%. Obviously, a lot needs to happen in the month of December for Bernanke’s predictions to prove prescient.

Thankfully, the economists who help investors decide whether or not to buy gold have been more accurate in their assessment of the world economy—and the price of gold.

In December, CNBC mentioned Goldman Sachs:

“Goldman believes low U.S. interest rates will continue to underpin the rally in commodities like gold. The firm expects the precious metal futures to climb to $1,690 an ounce by the end of 2011 and continue to move higher.

The Bullion Research Desk of Commodity Online on December 22, 2010 said:

“Gold price to hover around $1500-$1600 range in 2011. Gold price will go up in 2011, driven by the fluctuations in US dollar and other currencies, dwindling productions, increasing mining problems and rising demand for jewellery and investment for the yellow metal. Gold price is definitely going to cross the $1500 mark per ounce in 2011 and it will remain in the range of $1500-$1600.”

And late last year, Bloomberg analyzed the gold price predictions of almost 30 investors, analysts, and traders. The ‘average’ prediction was $1,500 per ounce.

So…the ‘gold gurus’ were actually wrong—the price has exceeded their predictions. The factors influencing the price of gold have been more intense and are not going away as the headlines from the Eurozone crisis are proving.

So—is it a good time to buy gold? Remember…JP Morgan predicted a high of $2,500 per ounce by the end of 2011. Will they be correct? With the future of the Euro in serious doubt, gold could easily top $2,000 an ounce.

“The communication of disease from one person to another by close contact.”

In European countries, the disease is debt—specifically default. Greece is having difficulty repaying its debts and Italy and Spain are extremely close to being in the same situation. The disease is spreading to all the European countries that use the Euro as their currency—which is all the major European countries excluding the United Kingdom.

And even through the currency in England, Scotland, Wales, and Northern Ireland is Pound Sterling, the U.K. is being affected by this crisis. The Prime Minister, David Cameron, has been part of the negotiations, the discussions, the summits, and all the meetings. In many cases, he’s been more vocal about the truth about the situation than others, saying recently there was now a “big question mark over the future of the Eurozone.”

Until now, the net result has been uncertainty. And if there’s one thing equity markets hate, it’s uncertainty. And when equity markets are not happy, the price of gold typically rises and it can be a good time to buy gold during uncertainty.

The chickens are coming home to roost for the leaders (and the countries) who got Europe into this mess. Angela Merkel, the German chancellor, has been saying that it’s a good time to ‘allow’ certain countries to leave the Eurozone. That’s a polite way of telling certain countries get out. In Greece and now, Italy, the Prime Minster and President, respectively, have resigned. Both countries now face a difficult choice: pursue austerity measures or get kicked out of the Euro.

With the possibility of two of the larger countries in the Eurozone leaving, the possibility exists that the Euro will collapse entirely. This could be catastrophic for large swathes of the European economy. With Europe moving closer and closer to the precipice, the price of gold has been inching upwards toward its record price of $1,923.70 an ounce on September 5 but dropped to $1,623.97 by early October. The price was back up to $1,787 per ounce on November 11. If the European crisis continues—and it looks likely to keep going—then the price of gold is likely to rise and thus now is an excellent time to buy gold.

Either the Euro will collapse completely, the ‘offending’ countries will be booted out, or the Eurozone will follow David Cameron’s suggestion and print money to get out of trouble. The latter will make the currency worth a lot less and inflation could emerge as a threat—inflation makes the price of gold increase.

About five weeks ago, a British politician said the Eurozone had six weeks to resolve the crisis. That ticking sound? It’s a bomb about to explode. And this explosion, however fierce, will likely affect the price of gold.

Until September 6, the factors influencing the rise in the price of gold were clear and consistent:

• Global turmoil in equities markets leading to significant declines in share indexes.
• A weak dollar.
• Quantitative easing in the US (printing money).
• The Greek debt crisis and Eurozone trouble.
• Strong demand for gold from China and India.

These factors are still in place. So…what caused the precipitous drop? And is it time to sell gold or buy gold? To explain the drop, many financial analysts pointed to huge gold sell-offs from some of the larger investment funds. John Paulson, a hedge fund manager, sold bullion to cover September losses. Other fund managers were forced to imitate the move. There was also some profit taking. And investors who decided to buy gold while the market was toward the $1,900 an ounce mark have been waiting for the price of gold to show signs of increasing before they buy gold again.

There’s ample signs that upwards momentum for gold will start to build again. Last week, The Daily Telegraph in London broke the news that Qatar Holdings (the Qatari royal family) invested $1 billion in European Goldfields, a mining company that’s about to start mining gold in Greece. The Qataris are, according to the newspaper, actively looking for more opportunities in gold mining. Two of the more prominent banks, Credit Suisse and Lazard, advised Qatar Holdings and this shows long-term optimism about the price of gold among analysts – and this provides incentive to buy gold.

In previous blogs, we’ve stressed the strong link between the price of gold and the strength (or weakness) of the U.S. dollar. At the beginning of October, the dollar declined and gold experienced a bounce upwards. So for those investors looking to buy gold or sell gold, keeping an eye on the United States Federal Reserve is important: especially if ‘The Fed’ decides to initiate a third round of quantitative easing as this would devalue the dollar.

Despite a bad September for the price of gold, experts remain optimistic the price of gold will continue to increase. The factors that have influenced the 14% increase in the price of gold remain in place. Once investment managers have finished their brief sell-off to cover losses in risky investments, some downward pressure will have been removed. Credit Suisse believes gold will reach $1,850 by the beginning of 2012 and Morgan Stanley’s 2012 forecast for the price of gold is now up to a significant $2,200 per ounce.

Contact us at the Australian Bullion Company if you’d like to know more.

In the past 18 months, the price of gold has often increased when stocks have taken a pounding. However, this past week, the price of gold declined as investors decided to sell gold bullion. And if there’s a reason for the decline in the price of gold, the current crisis, or impending crisis, in the Euro is a possible reason. The dire financial situation in Greece, and the potential for what’s grimly being called ‘contagion’ means that financial ministers in Europe must make some major and potentially brutal decisions about Europe’s currency. Against this backdrop, the dollar has regained some strength. There was also an indication that some institutional investors were selling gold bullion to take profits—as their equity investments continued to show weakness.

Historically, there’s been a strong inverse relationship between gold and the price of the dollar. So, for those who are thinking it’s a good time to sell gold bullion, the key question is ‘what’s going to happen to the dollar?’

In the next several months, all eyes will be on two key global economic drivers.

1. The Federal Reserve
2. The Eurozone

With the economy in the United States continuing to sputter, despite two rounds of ‘quantitative easing’ and a massive stimulus package, the Federal Reserve is considering another round of quantitative easing to generate growth. As we’ve written in previous blogs, quantitative easing is code for printing money. And when the government prints money, it devalues its currency. And when a currency is worth less, inflation rears its ugly head and when inflation rears its ugly head, gold becomes more attractive.

In the United Kingdom, Chancellor George Osborne said that European Leaders only had six weeks to find a solution to the financial crisis with the Euro.

“Patience is running out in the international community,” Osborne said. “More needs to be done to avoid a disorderly outcome.” Ironically, U.S. Treasuries may be attractive as the uncertainty in the Euro continues; U.S. Treasuries set a new low yield of 1.7 p.c. as investors sought a safe haven. As the dollar strengthens, it may be a good time to sell gold bullion.

However, major problems linger in the United States economy and the global economic factors that led to the increase in the price of gold in the last two years remain. Yes—it may be a good time to sell gold bullion to take profits but there’s a strong chance the price of gold will reach the expectations of many analysts and hit $2,000 late this year or in early 2012. While there’s no way to predict the price of gold with total certainty, the next few weeks are likely to be volatile—with a capital ‘V.’

The rise in gold has attracted all the media attention. Silver is benefitting from the on gold’s ‘coattails’ and the overall rise in precious metals. Many investors who feel they have missed out on the rally in gold prices are buying silver: instead of taking a risk by shorting gold, they are looking to buy silver.

An Attractive Metal

Outside of jewellery, gold’s uses are few and far between. However, there’s a strong industrial demand for silver. The main reason: it conducts electricity. So technology companies buy silver. Industrial uses account for 40% of silver production. You’ll find silver in everything from plasma TVs to solar batteries and even water purification systems. Two countries that buy silver? India and China. Led by these two countries, total global industrial demand for silver will increase from 487 million ounces to 670 million ounces: an increase of 35%.

Were the Predictions Correct?

On April 12, 2011, Alex Steel of investment website The Street (www.TheStreet.com) canvassed several traders and asked them to predict the price of silver at the end of the year. Who is looking like they’re going to be correct?

Note: the price of silver on August 26, 2011 was $41.13/oz.

• The founder of Silver Investor, David Morgan, predicted silver at $45 an ounce.
• President of Tower Trading, Anthony Neglia, told The Street to expect $50.
• A senior strategist at Lind-Waldock, Phil Streible, predicted $42.
• Great Panther Silver CEO, Bob Archer, predicted $40.
• The CEO of First Majestic Silver, Keith Neumeyer, predicted $50 an ounce.
• Chairman of GFMS, Philip Klapwijk, also predicted $50 an ounce.

With four months left in 2011, the predictions are so far very close to being correct—albeit a little ahead of time. So is now a good time to buy silver?

Nobody can accurately predict the price of silver or any commodity. However, UBS, one of the largest and most prestigious banks in the world, predicted a significant increase. And many prominent silver traders and experts have so far been ‘in the ball park’ about the price of silver since their April predictions. So it’s certainly a good time for the serious investor to look to buy silver as part of their investment portfolio.

Adjusted for inflation, however, the real record would be closer to $2,300 an ounce, set after the 1970s oil crisis. So, in real terms, gold could increase in value significantly. In fact, JP Morgan announced it thought that gold prices may reach $2,500 an ounce by the end of this year, making now a potentially strong time to buy gold.

Why this staggering increase in gold prices? Right now, it’s one of very few safe harbours during this global economic storm. The major fall in bank stocks in the United States and in Europe signals the possibility of a double-dip recession. Just the threat of this will continue to see investors fleeing to gold.

The demand for gold remains extremely high. In the second quarter of 2011, demand globally was 919.8 tonnes or $44.5 billion. Much of this demand is coming from the growing economies of India and China. There’s an additional reason for demand in these countries: the threat of inflation. Again, gold provides a safe haven when inflation rears its ugly head. Combine this with currency devaluation and the chaos in stock markets and it’s easy to understand why investors are buying gold bullion.

The downgrade of U.S. debt by Standard and Poor’s also sent investors into gold. The downgrade made this harrowing statement: the world no longer sees government bonds as the ultimate ‘safe bet.’ Again, this type of massive change sends investors flocking to gold… and not just investors: the central banks in China and South Korea are also buying gold.

So is now a good time to buy gold—despite record highs? If current economic conditions persist, then it looks like investors will continue to buy gold. There will be some volatility day-to-day in gold prices but the conditions are currently in place to make the JP Morgan prediction of gold at $2,500 an ounce a strong possibility.

On August 14, the price of silver closed at $39.10 an ounce. That’s up from $30.53 in mid-February and up from $17.99 in mid-August 2010. In a year, silver investors have more than doubled their money. And all this despite a ‘blip’ in the price of silver when the price dropped in May from a high of $48.58 to under $35.

While the increase in gold has certainly helped investors who bought gold, the ‘stealth’ gain has come in silver. Is now a good time to buy silver bullion as part of your investment portfolio? Or is the price likely to decrease?

Let’s take a look at demand first. Silver is used extensively in jewellery, photography, silverware, and in coins. Some of the many uses:

• Water Purification
• Medical
• Mirrors
• Coatings
• Solar Energy
• Water Purification
• Batteries
• Bearings
• Catalysts
• Electronics

Consumer demand for silver is also strong—especially in emerging and developing markets like silver. This increases demand. And the same global economic factors affecting the price of gold are affecting the price of silver. These include economic uncertainty in Europe and prolonged lack of serious growth in the United States.

Silver is a scarce commodity—like gold. Supply never really catches up with demand. Especially now that silver is being used extensively in growing technologies like solar energy. The Silver Institute says that demand for silver from industry will increase 36% by 2015. And from 1990 to 2000, global consumption was over 2 billion ounces. In 2011-12, consumption in India could top 1,200 tons—based on government figures.

Looking at The Ratio

The historical ratio of the price of gold to the price of silver is 20:1. The ratio is currently 33:1 which means many experts believe silver is due to catch up–making it a good time to think about buying silver. If the ratio catches up, the price of silver could increase to over $100 and even climb to $175.

One country that’s going to continue to buy gold is China. In the past two years, China’s appetite for gold has been insatiable. The country has gone from being a net exporter (100 million ounces a year) to a net importer (150 million ounces a year). The Chinese are buying silver as a hedge against the decline of the U.S. Dollar and the threat of internal inflation.

So it’s an excellent time to think about buying silver to add to your portfolio. The reasons investors buy silver are clear—and motivating these investors to buy this valuable commodity.

The national debt in the United States stands at over $14.3 trillion. This debt comes from the cost of keeping entitlement promises to the elderly and poor. In this blog, we’re here to discuss buying gold and not make any political statements. However, the numbers are staggering:

• Medicaid, health care for the poor, cost American taxpayers $243 billion in 2010.
• 50.5 million Americans are on Medicaid.
• 46.5 million are on Medicare.
• 52 million are on Social Security.
• 44.6 million are on food stamps and other nutrition programs.

At the current rate of spending, the United States will have to issue up to $10 trillion in new debt by 2021. Why does this mean it’s a good time to buy gold?

To pay for this spending, the United States can raise taxes massively or cut welfare spending. It seems unlikely that either of these will take place in the near future. So America must borrow more AND it must generate more tax revenue by growing its economy. But the economy isn’t growing in the United States—growth rates are stagnant. To light a fire under the economy, the Federal Reserve has used two rounds of ‘Quantitative Easing’ which is another way of saying, ‘let’s print money.’ This decreases the value of the U.S. Dollar and introduces the spectre of inflation.

With inflation a probability and the value of U.S. debt decreasing, investors have been fleeing to gold to protect their assets and provide a hedge against inflation. The market is proving this. Gold is up 11% this year and we’ve seen record prices. Despite these record prices, we believe now is a good time to buy gold. The demand continues to rise while the supply cannot keep up.

With at least another month of global economic uncertainty ahead, the price of gold may experience some dips. However, we believe the upward trend will continue and a good time to buy gold would be in one of these dips.

Gold fund manager Adrian Ash recently told London’s Daily Telegraph, “Physical gold, indestructible and rare, will continue to appeal as the ultimate store of value for retained savings worldwide. Because, just like in the Eurozone, the U.S. debt cannot be settled in full. So it won’t be.”

While the media focuses on the U.S. debt ceiling, significant financial problems will continue to plague America as long as the country continues its current entitlement programs. These problems make it a good time to buy gold.

We believe there were three factors influencing this record rise.

ONE…The Federal Reserve in the United States released the official minutes from the last meeting of the Federal Reserve Board and the minutes pointed toward more of what the Federal Reserve calls ‘quantitative easing’ or QE. Don’t be fooled by the phrase or its abbreviation: QE is code for printing money to stimulate the economy. Unfortunately, QE means an increased risk of rising prices and investors use gold as a hedge against inflation.

TWO…Moody’s, the investment information service, downgraded Ireland’s debt to ‘junk’ status. When a major EU country like Ireland is close to defaulting on its debt, alarm bells start ringing, investors become worried about the European economy and when they’re worried, they buy gold.

THREE…A meeting of EU leaders was scheduled for Friday, July 15, to discuss the default of Greek debt. It seems it’s not a case of ‘if’ but ‘when’ or ‘how.’ Again, investors buy gold when there’s a risk of credit default and/or massive currency devaluation.

The rise in the price of gold on July 13 was the eighth straight day the price of gold rose. This had not happened since October, 1996. Michael Widmer, a Bank of America Merrill Lynch analyst told London’s Daily Telegraph:

“Gold will keep rising for the next five years, even if it has some crests and troughs. Those holding gold should hold on to it, while others should probably get their hands on it as it is going to be on an upward trend.”

Gold is up 11% in 2011. So is now a good time to buy gold? It’s certainly a mistake to buy gold or any commodity based on its daily or monthly performance. But the record price on July 13 is proof the analysts who follow gold are getting it right. These analysts have looked at the global economy and predicted increased demand. Couple this with tight supply and the price of gold continues to rise-and set records.

Let’s not forget-in 2008, gold analysts were labelled as slightly insane for predicting a gold price over $1,000 an ounce. It was trading at around $750 an ounce in July 2008. So gold has doubled since 2008 and it’s proved the analysts correct.

Nobody can predict the future and there’s always the possibility that investors who buy gold will lose money. However, for at least the last three years, analysts who follow gold have been right and buying gold has been a profitable decision.

But there’s more to the increase in the price of gold than demand: there’s a supply problem. If you live anywhere near a jewellery store, you’ve probably noticed it’s no longer just a store selling watches, rings, pendants, and the like. It seems that every jewellery store has a massive ‘Buy Gold’ sign outside and newspapers are full of ‘We Buy Gold’ advertising. There’s even a social trend: gold parties. The host or hostess gathers some friends, tells them to bring some ‘spare’ gold and a local company provides champagne—then buys gold. Proceeds go to the host or hostess, the people at the party, and/or a charity.

Even with this ‘retail’ supply increasing, there’s not enough gold in the world to meet demand. And because gold is difficult to mine and the demand continues to increase, serious investors have been paying extremely close attention to gold mining companies. And with good reason.

• Mining company Rio Tinto has provided investors with an average return on equity of 22.2% over the past three years.
• Freeport-McMoRan Copper and Gold has major interests in gold mining and its stock price has climbed from US$28.30 to today’s price of US$53.50.
• The Motley Fool’s website cited Newmont Mining as a ‘Dividend Standout’ as Newmont raised its dividend by 33%.
• One of the most watched investors is Paulson and Company’s John Paulson whose hedge fund benefited massively from the 2007 U.S. mortgage crisis. Paulson recently increased its share holdings in gold mining company Barrick Gold by 125%.

Finding ‘fresh gold’ is expensive and arduous. A mining company has to find the gold, mine it, process it, then ship it. Mines are usually subject to strict environmental controls and can be remote. The costs to mine and process gold are extremely high. Gold mining companies would only be investing billions in existing and new mines if they felt confident the price of gold was going to remain steady—and increase.

Investors are increasingly confident that gold mining companies are making the correct decisions and investing wisely—again based on investor’s confidence in the stability of the gold price. The interest in gold mining stocks provides further proof that gold demand is likely to remain consistently strong for the next several years, making it an excellent time to buy gold to add to your portfolio.

“The trend is undeniable, gold demand in China is rising rapidly,” Walter de Wet, Standard Bank head of commodity strategy, told The Wall Street Journal in December 2010. And The World Gold Council estimates that China’s gold demand could double in 10 years.

So why is China buying so much gold? Eight reasons.

1. Inflation was 4.9 per cent in China in January 2011 and gold is a hedge against inflation. So there’s internal pressure to buy gold.
2. Inflation is starting rear its head in Europe and also in the United States. Again, the Chinese are heavily invested in European and American economies and see gold as a hedge against inflation in Europe and the United States.
3. American fiscal policy. To deal with its financial struggles, the Federal Reserve has been using ‘quantitative easing’ which is ‘printing money’ and this devalues the dollar. China has invested in American Treasury Bonds. Gold counteracts declining bond yields.
4. Middle Eastern unrest is likely to continue due to steeply rising food prices and political factors. This could result in another oil price spike which could result in another gold price spike.
5. Chinese people are worried about internal inflationary pressures. The government has promised to raise food supplies and address an increase in property prices. But the Chinese people, currently losing 1-2% in a savings account, are buying gold.
6. Gold is so popular in China that more than 1 million people have opened a physical gold linked savings account created by The Industrial and Commercial Bank of China Ltd. The bank stated it has more than 12 tons of gold stored on behalf of investors.
7. Last year, the Chinese government made it easier for financial institutions and individual investors to buy gold; more banks are importing and exporting gold. Previously, China’s central bank controlled the country’s gold market; the ‘dragon’ of demand for gold in China has now been unleashed at the retail and institutional levels.
8. There’s no guarantee the dollar will remain the world’s reserve currency; if the dollar collapses, gold provides a strong ‘plan B.’ China realises the potential of the declining influence of the dollar and has been buying gold. China is one of many countries looking to diversify monetary holdings.

Other countries, especially India, are big players in the global gold market but China will continue to influence the gold market for the next several months. We believe China will continue to buy gold and their desire for gold will put upward pressure on prices.

When you’d like more information about how to purchase gold, click here to contact us today. To receive our free newsletter, click here now.

Periods of volatility are normal in the life of a commodity and, indeed, any investment. In the past 18 months, the price of gold has encountered some wild months: February, June, October in 2010 and March this year.

Nobody can predict future prices with absolute certainty. However, it’s clear a massive factor in the rise of gold is the American economy–specifically its debt levels and the decline of the dollar.

Unless the Federal Reserve dramatically changes course, which seems unlikely, the United States has a major problem coming up: in ‘layman’s terms’ the U.S. has ‘reached its credit limit.’

The numbers are chilling. In 2005, America’s debt ceiling was $7.8 trillion; debt may increase to $18.8 trillion by 2014 – more than 100% of GDP. So the only way the U.S. can fund this debt is by printing money. This creates massive inflationary pressure. Gold is a proven hedge against inflation: demand for gold will likely increase and this will likely push the price up for at least the next several months.

So, while the gold price has experienced some turbulence this month, we believe it’s still a good time to purchase gold for a portion of your investment portfolio. Especially when the price of gold dips.

America’s economy remains the world’s largest even though the economy has experienced some turbulence. The Federal Reserve, which controls the money supply in the United States, has a massive impact on the global economy. Perhaps you’ve heard of the phrase “quantitative easing” which is essentially code for “printing money.” It’s the tactic the Federal Reserve is using to stimulate America’s economy.

We could debate the wisdom, or otherwise, of this tactic but there’s no arguing its effect. The dollar is worth less against other currencies and the weakening dollar means higher gold prices. So, for investors interested in buying gold, paying close attention to the Federal Reserve is vital.

• Federal Reserve Chairman Ben Bernanke held a press conference on April 27. He said that quantitative easing will continue. During the press conference, the dollar fell to 1.47 against the euro and $1.66 against the pound. Gold rose 1.4%.
• Kathy Lien, director of currency research at Global Forex Trading told CNN Money, “The Fed has made it crystal clear that it is not going to do anything to stop the dollar from falling.”
• Investors are clearly worried that quantitative easing will lead to inflation. Their “buy gold” tactic is a hedge against inflation. Inflation is starting to rise in the United Kingdom: their consumer price index was 4% in March.
• Central banks around the world are buying gold bullion. India, China, Qatar, and Russia are among the countries investing in gold. These countries will continue to buy gold as they follow a strategy of diversifying their investment portfolio—and leaving the weakening dollar.
• A country like Qatar, which receives its payment for oil in dollars, is quickly turning around and buying gold. From early 2008, the Qatari central bank has bought at least a ton of gold every month. Other countries want to buy gold: Mauritius, Sri Lanka, Kazakhstan, Venezuela, and the Philippines are enjoying the “buy gold” party. China will likely increase its gold reserves to 6,000 tons in the next five years and may spend $1 trillion on gold bullion.
• Robert McEwen, CEO of gold producer U.S. Gold Corporation, stated that gold may reach $2,000 an ounce this year.
• The last major gold rally ended in 1980 when the Federal Reserve increased interest rates to 20%. The current Federal Reserve Chairman has indicated he’s not likely to increase interest rates—even from the current historically low levels.
• Investor Warren Buffet recently revealed he believes the dollar will decline significantly.
• Demand for gold remains high while the supply remains relatively low due to the difficulty of finding and mining significant quantities.

Profit taking will continue in gold and this may create daily and weekly turbulence but the factors above have convinced many investors, and national governments, to buy gold.

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One of the beauties of gold is the fact that you can buy it whenever you need it. Unlike stocks and other investments, you can buy gold whenever you need it, timing is never an issue.

Ask yourself “Do I believe that I need to own gold?”, if you answer ‘yes’ then there is no reason to delay buying gold. Every day that you wait you are holding off on diversifying your portfolio. Economic crisis could come swiftly, wipe out your assets, and then you would be kicking yourself for not making the gold purchase you were thinking about.

Waiting to need to buy gold is poor strategy. There was a rush to buy gold during last year’s economic downturn, national mints could not keep up with public demand, and premiums went through the roof.

Gold can be almost impossible to buy when it is in high demand. During these times, you cannot just call a gold warehouse and place an order for gold. Even national mints cannot keep up with gold when their is a rush of demand like the ones in 2008 and early 2009.

In fact, Times Online posted an article in February discussed buying gold during a recession.

Even people who collect numismatic (high quality and rare coins) gold will have a hard time buying during these rushes to buy gold. Great demand can make people hold tight to their personal stores of gold. In some cases, the supply of gold can just simply disappear.

That’s why the best time to buy gold is now, global markets are still in an economic downturn, but the increased demand for gold has subsided. Gold will be easier to buy and at a lower premium than it has been recently.

Video transcript: Gold and Silver Safe Haven Investments

Hi, I’m Dr Marc Dussault and I’m here with Peter August, Managing Director of Australian Bullion Company.  And as you can see I have a blackberry mobile phone and I have some gold and silver bullion coins and some bars as small as this over here, 20 ounce, 10 ounce, I have a 1 kilo here and a 5 kilo which as you can see is quite heavy.

It has a good feel to it.

I know, I just love doing that and I’m sure you can hear that on the video.  Peter, really in the next 60 to 90 seconds…

Sure.

Why would someone invest in gold or silver bullion compared to the stock market or property market?

Safety, safety, safety; okay, you’ve got the ultimate safety, the ultimate safe haven investments here.

Because it’s physical, because you can touch it, you can go to your safe and take a look at your coins and your bars and you know…

You know how much you’ve got in value.

Yeah.

Now as currencies depreciate, as there might be political risks happening around the world, you know that you’ve got something tangible, that’s highly liquidable at any time.

And that means that you can basically buy and sell it whenever you want.

Correct.

If you were to take a 1 ounce gold coin about a year ago, you would have sold that for about I think you were telling me $900.

Yes.

Now, in November 2009, it’s about $1,100, actually $1,200 Australian.

1,200 plus.

1,200 plus.  So you can see that that’s a tremendous gain in a very short period of time.  But this is an upward trend because this is physical.  And I keep doing this on purpose because that’s why you want to invest in bullion; because it’s actual physical asset that you can touch.  And that’s the amazing thing is…

It’s outside the clutches of government manipulation.

Absolutely.  It’s hard, you touch it, whenever it’s on the table you can’t help yourself but literally pick it up, one because obviously it looks great and it’s gold, I mean come on, gold.

I love it.

You know; but from an investment point of view that tangible aspect of it is something that you really want to start considering for your portfolio.  Just one last thing, you used to recommend people have about 10% of their portfolio in bullion…

That’s correct.

In precious metals; and you’ve revised that now to…

15 to 20%.

To 15 to 20%.  And you recognize that with the global financial crisis and geopolitical forces…

You’re very good Marc.

Yes I know, I’ve been reading my thesaurus, and I’ve been watching the other YouTube videos that explains all of this, that this really is something that gives you peace of mind as an investor.

Correct.

You’re seeing a lot more demand from private investors aren’t you?

Absolutely.  And I mean we’re not the only ones that are seeing the increase in demand; that increase in demand is occurring worldwide.

And those private investors, those are dentists, those are…

From [garbologists] to proctologists.

From [garbologists] to proctologists, they’re professionals, they’re families, right?

Absolutely.

There are a lot of …

All walks of life.

A lot of families buy this as wedding gifts.

We’re starting to see the general public take an interest.  It’s still early days for the general, most people do not have gold on their radar.

Yeah.

But we’re starting to see it; we’re getting a lot more enquiries from people that say, look I don’t really know much about gold but you know my instinct says I need to have some.

Yeah, the instinct is it’s physical…

It’s safe.

It’s a hard asset, it’s safe.

It protects your wealth against the ravages of inflation and other mater that we’ve discussed.

We have a series of other YouTube videos that explains all of these in more detail, I hope that you’ll click on them and watch them, they’re just a couple minutes.  And I want to thank Peter for taking time…

You’re welcome.

Out of his busy day today to explain these things to you because they’re very important.  You want to get some of this for yourself.

VIDEO TRANSCRIPT: GOLD PRICE AND VALUATION

Hi, I’m Dr Marc Dussault and as you can see its November, it’s 2009 and I’m here with Peter August, Managing Director of the Australian Bullion Company.  And I wanted us to take some time today to explain something that for you is self-evident but for other people out there who are considering gold as an investment what they might not know is that these are actually gold bars and we have 105 ounces of gold right here, which by the way in today’s price is worth how much?

Over 120 thousand.

Over $120,000, so it’s a great compact way to invest.  Now one of the things that we’ve all done as a kid, and Peter you remember your days back when you were a child and you started investing in coins and collecting coins.

Yes.

There’s this thing called the numismatic value of coins.

Sure.

Can you explain what that really big word is for people.

Yeah, absolutely.

Cause I have a coin here, and I have another coin here; so what’s the difference between this one and that one, other than the size?

Sure.  Okay; this particular coin Marc is a 1 ounce gold coin.

Okay.

It’s 4 nines pure so that’s 99.99% pure, and it is bought and sold on it’s intrinsic gold value.

Yeah.  So you’re buying it because it’s 1 ounce?

That’s correct.

Okay.

Now this…

And this by the way is a 1 ounce gold bar.

That’s correct.

So that’s a bar, this is a bar, very small one, but this is a coin.  He’s laughing at me because I made a joke earlier that I thought this was a coin but this really is important to understand the difference between the 2.  We’re gonna be talking about gold as an investment not just as a pastime of collecting coins.

Just before we get there; gold bars are also known as gold ingots.

Gold ingots, yeah.

And even some people call them gold biscuits.

Gold biscuits; I’ve heard of ingots but not biscuits.

General the Indians are called them gold biscuits.

Okay, excellent.  Indians obviously from India.

Correct.

Cause there’s a really, really strong tradition in Indian culture which we’ll talk about later.

Sure.  Okay…

Why is this in a cardboard, actually it’s not a cardboard…

It’s in a coin mouse and it is to protect the coin.  Now you asked the difference between a gold bullion coin and a numismatic coin; numismatic means that it has collective value over and above the intrinsic metal value, whether it’s gold or silver.

In other words this is worth whatever an ounce of gold is worth…

That’s correct.

This is worth whatever the weight of this is, plus something else.

Plus a premium for its rarity.

Okay.

Okay; so that’s essentially the difference between bullion and numismatic.

Excellent.  Now the other thing is, this is a 20 ounce gold bar, so this is worth about 25,000.

About that, yeah.

Okay, so this is worth $25,000.  And you can’t see it up close but I’m probably gonna edit it, a close up of this so that you can see, but it actually doesn’t look anywhere as nice as this coin does; so explain to me why, first of all what’s stamped on it and why the actually bar actually has that kind of rough feel to it.

Sure.  When they make, when bars are made they’re made in large quantities.

Yeah.

Okay.  They’re poured into a mold and then as the metal is cooling down it is stamped.

Yeah.

Now that’s the way gold bars have been made for thousands of years.

Thousands of years.

So that’s the way it’s known to the market.  They’re slightly rough, they’re not perfect.

Okay.  In other words they’re not square edges, they’ve got that rough look and all of them actually look different.  Some of them actually even look like they have fingerprints.

Well I assure you they’re not fingerprints because the person who put a finger on a hot piece of gold would have…

I understand, but that’s actually what it actually looks like.  This one actually looks like a fingerprint.

Yeah, what it is, it’s actually the ripple in the metal as it…

As it cooling.

As it’s being poured the outer part of the metal is slightly cooling, cooling, cooling, so it creates a ripple effect.

Wow!  Now this one doesn’t have a ripple effect but it looks like it has dents.  So it looks like its actually dented in, obviously its not.

Yes.  Again that’s the central part of the pour generally speaking.

Yeah.

Okay; now this particular coin versus a bar is…

By t the way this is very heavy.

And very valuable.  This particular coin versus the bar is they use specially made dyes, they get special blanks the made up.

Yeah.

And there is of course a cost to all that.

Sure.

So when you buy gold in this form you actually pay a premium to gold in bar form.

And what would that premium be?

It can be as much as 6 or 7%.

So 6 or 7%, so it looks nice and pretty like this, so it’s kind of a fun, tells a story, it tells a history of a country, or something of …

Symbolism.

Some kind of symbolism in this series, often you have to buy a series of coins.  It’s a great way for kids to start learning about history and investing in coins.  When you have actually bars like this they’re not actually serialized, or are they?

Well, generally speaking on smaller bars these days they’re not serialized.

They’re not serialized.

They don’t have serial numbers anymore.  In the olden days…

They might have some serial numbers.

Correct.  You’ll see some of them…

So like this one here, would that be a serial number?

No, that’s the fineness, that’s the 4 lines…

That’s the fineness, okay, so that’s… So explain to me if you can, why is it 99.99%, why is it never 100% gold?

Well on earth you can never get 100% pure, there is always some impurities.  My understanding is that in space they can get it to 100% or as close to it as possible; but it could be one part in a billion, it could be one part in a centum, but there’s always slight impurity.  So the standard for investment grade gold in the world today is 99.9%, or 4 nines pure as they say.

So 4 nines pure is 99.99%?

Correct.  One other thing that I’d like to say as well, with regards to investing in gold, if you buy 4 nines pure in Australia you don’t pay GST on it, whereas if you buy anything less than 4 nines pure, for example, a sovereign was commonly traded as a gold piece right up until the introduction of GST; but now because it’s less than 24 carat, or less than 4 nines, it’s actually 22 carats which is 91.6%, it attracts 10% GST.  So for people thinking of investing in gold…

You want to go to 99.99%.

Correct, so you don’t have that extra 10%…

You see, it was worth listening to this YouTube video just to know that.  Thanks for listening.

Like any commodity, the value of gold rises with demand and falls with supply. But, unlike other commodities, there is a limed supply of gold, you can’t just make more of it. Yes, more can be mined, but not at the rate that it is demanded. And, there is a virtually unlimited amount of demand for gold because of gold’s historic and ever-rising value.

Gold is usually in a strong bull market. The definition of a bull market is one that has gains of 20% or more a year. Since 2000 alone the gold market has had on average gain of 202% per year. Gold has made a fortune for those wise enough to invest.

In 2006 CNN Money did an article on the current ‘gold rush’, but that was nothing compared to the demand that we have seen over the past few years. Anybody that bought during the 2006 ‘rush’ would have made a lot of money during the next rushes that occurred in mid-2008 and again earlier this year.

Why does gold’s value rise so fast?

Well, part of it is the mining issue I mentioned earlier. The world’s mines produce about 2,500 metric tons of gold a year. The world demands between 4,000 and 5,000 metric tons of gold a year. Gold demand outstrips demand by 60% to 100% every year.

The world’s banks were allowed to sell there supply after the end of the gold standard, which was a system that forced countries to back their currency with physical stores of gold. From the mind 1960s to the late 1990s, banks released enough gold to marginally keep up with the worlds demand. By 2001 the banks had run out of their massive stores, and the demand for gold skyrocketed.

Right now is a strategically critical time to invest in gold. The arrival of online trading and increased interest in gold as an investment may eventually bring the market into an equilibrium that results in a higher gold price. Jumping into the market right now means buying gold at price that should prove to be historically low.

Gold can be seen as insurance, it will always be worth something, no matter what else happens in the world. Mighty stocks can plunge to zero, inflation can render the dollar worthless, bond interest rates can fluctuate, but gold will always be valuable.

The gold that you buy today will be able to buy the same amount of goods, if not more, in the future. Your grandchildren and great grandchildren will be able to reap the benefits of your gold investment.

Video transcript: Gold and Silver Bullion For Wealth Protection

Hi, I’m Dr Marc Dussault, and you can see it’s November, we’re in 2009, I’m here with Peter August, the Managing Director of the Australian Bullion Company.

Peter I want to thank you, hello, yes of course.  We’ve been sitting here for about, well I won’t say how long we’ve been doing these tapes but it’s been a great morning here and what we’ve done is we’ve put together a handful of YouTube videos that you can access through clicking the bubbles that you’ll see on the YouTube videos.  And what we’ve done is we’ve explained why you would invest in silver and gold bullion.  And we’ve explained also the difference between numismatic coins, in other words coins that you collect, as well as these bars here that I do know now that these are bars and not coins; and to take you through the process of why you would invest in gold or silver bullion.

Now we’re talking about different things; if you would just summarize, just in one sentence why someone would invest in gold bullion, or silver bullion, compared to anything else, what would that be?

To protect their wealth, their hard earned wealth, in fragile financial times.

And when we say protection we’re talking about an increase of about 10% historically that you’d recommend people have in bullion…

Sure.

In respect to their total value of their asset base, to now about 15 to 20%.  So you’re not saying sell all your stock, sell all your properties, but just increase the proportion of the gold and silver that you have within your portfolios.  Am I right?

Absolutely.  This is your insurance against calamity.  Okay, now I mean 10 years ago the risk of any kind of financial calamity, or geopolitical calamity was quite small so henceforth you had a very low gold price.  But that risk has increased dramatically.

And we all recognize that it’s there to stay.

Yes.

What we’ve done, Peter and I have spent some time preparing about a handful of YouTube videos, we’d like you to watch them; you’ll see that there’s bubbles on each one so they’re interlinked.  Within this YouTube channel you’ll see that they’re all there, we’d love for you to take some time to look at them and just consider gold and bullion as an investment, as a percentage of your portfolio, anywhere between 10 to 20%.  If you don’t have anything, what I should say, if you don’t have any gold or silver bullion you can start with something as small as 1 ounce, or even fractions of an ounce.

Correct, yes.

And you can start with coins to get the kids interested in it, or just for you to start getting interested in it because these numismatic coins are really interesting, they each tell a story, and even though you pay a slight premium for them it might be the way you want to start.  But absolutely take a look at the YouTube videos.  And Peter thanks for taking the time out of your busy day, because I know that the gold rush is on right now and you don’t want to miss out, you definitely want to get in on the action.