Falling Gold Prices—the Opportunities for Interested Precious Metals Investors
Historically speaking, gold prices have always accounted for rise in the amount of money supply whenever governments have indulged in the debasement of currency.
However, since the Great Economic Recession, gold prices have remained low despite central banks across the globe printing massive amounts of money.
This trend continued into 2019, with gold prices falling in November to their lowest level in 3 months.
This recent decline in prices may lead you to believe that it’s not a great time to invest in gold. However, let us tell you that it’s actually the best time to buy gold.
Here are three reasons why gold prices are set to skyrocket in 2020 and beyond.
Central Banks Are Heading for Record Gold Purchases
For decades, central banks were net sellers of gold. However, since 2010, they have become net buyers – and this trend has gathered some serious pace in 2019.
In the first half of the year, banks topped their reserves with 374.6 tons of the precious yellow metals. Moreover, a report from the World Gold Council has revealed that they have been adding even more since then.
Also, Bloomberg Intelligence recently published a report, which stated that the gold purchases of central banks are on track to surpass a 50-year high.
This increase in the central banks’ hunger for gold indicates that the probability of gold prices going up from their current levels is high.
Quantitative Easing is Set to Increase Gold Demand
According to the managing director of Credit Suisse, Zoltan Pozsar, is set for another round of qualitative easing (QE), which means more money is going to be pushed into circulation.
He believes that the Federal Reserve will do QE4 either at the end of the current year or early next year.
The Federal Reserve’s balance sheet has been growing at a rapid rate since the economic recession of 2008, and with QR4, it’s highly likely that the balance sheet will grow at an even faster pace.
With another round of qualitative easing on the horizon, one thing is for certain: interest rates will plummet. And since there is a negative correlation between gold price and interest rates, the value of good is highly likely to spike.
Two of the World’s Largest Economies Facing Banking Instability
2019 has witnessed a drastic rise in the number of bank runs in China. There were five cases this year, with two banks actually requiring help last month.
In India, meanwhile, PMC bank was caught manipulating financial records, or ‘cooking the books’ as it’s referred to. This caused the Reserve Bank of India to impose a withdrawal limit of 1,000 INR for six months.
Moreover, the PMC bank scam came to the spotlight just days after India’s ‘Yes Bank’ was caught under reporting its bad loans by nearly $500 million.
The upshot is that the banking sector of two of the largest economies on the globe is in a shaky condition, and as the general population’s faith in the world’s banking system evaporates, they’ll have to consider substitutes to park and grow their, and precious metals like gold emerge as a great option.
If you need to learn more about investing in precious metals through an IRA, we’re here to extend a helping hand.