In an attempt to avoid a recession, governments have been forced to inflate their economies with an easy monetary policy and increased spending. Gold can offer inflation protection, as evidenced by the skyrocketing precious metal price in the late 1970s when inflation reached double-digit rates.
Simultaneously, inflationary fires are being fanned globally by the twin threats of rising oil prices and competitive de facto currency devaluations which only throw fuel on that fire. These fundamental developments will add more potential to the precious metal owners.
Gold is indeed uncorrelated with most other assets and moves independent of key economic indicators. This makes it a good diversification opportunity in portfolios. Studies show portfolios containing gold are more robust and better able to deal with market uncertainties and even outperformance during periods of systemic risk. Gold acts as a cost-effective form of protection that does not negatively affect and sometimes benefits long-term expected returns, while reducing risk in times of economic turmoil.
The yellow metal has offered investors a solid, long-term and tangible way to hold and protect wealth with relative safety.
Unlike paper investments, like equities, bonds and currencies that can and have become worthless overnight, precious metals have true intrinsic value…and, hence, will always be valuable!