by Elena Morozova
(UK)
The question is often asked is whether investing in gold is an antidote to this mega economic crisis that has gripped the global economy.
In reality he had invested in gold in January 2000 and held up well until now (nearly nine years) would be sitting on a gain of more than 90 percent.
What a contrast with invest a similar amount of your capital in deposits or stocks and shares or cash.
While the Dow Jones industrial average lost about a third of its value during this period from January 2000, S & P crashed by 48 percent and the NASDAQ gave up a whooping 72 percent.
Meanwhile, putting your capital in cash funds with interest accrued would have returned just over 30 percent.
But if you discount the fall of 20 percent of the value of the dollar, the value in money out just shy of 10 percent.
And so where is gold headed now?
Well, more than a year out of a decade see how gold has gained more than 90 percent, but now going forward in the short term is easy to predict exactly where the yellow metal will in these difficult economic times.
Will surge more than 900 dollars from its current level of about $ 860 or will trade a sideband between $ 750 and $ 930 or even correct back support levels around $ 600 to $ 650.
There may be another political crisis in the Middle East or further significant deterioration of the American economy that I would like to see more money seeking protection in gold.
We must also note carefully how during a couple of weeks at the end of 2008 the market saw unusual condition gold in backwardation when the cash price for gold is immediate delivery exceeds that for futures gold a few months off.
If the US Federal Reserve begins quantitative easing-or the printing of money by another term-then held physical gold could be seen as a hedge against inflation that follows such action.
In the long term, what is the Outlook for gold?
Many observers point out that gold is the only real money on the planet, which is the most robust, reliable coin to contain the long term if you want to preserve your capital and purchasing power.
Gold is a liquid investment and yet it is relatively short compared to the unlimited number of paper money, when printing to go forward. One billion dollars can become a trillion, and so on.
This really matter?
Well, all over the world central banks are printing money or fiat paper as if there's no tomorrow. In fact, their hands are tied, and so have very little option but to continue to "oil the wheels of the economy.
How many trillions of dollars do you think that the Fed will print in 2009? And what about the European Central Bank, how many euros extra will it issues? And that the Bank of Japan and China?
This is a slow process and the impact will not be seen and heard tomorrow, nor next week or in six months. But some time after this process of increasing the volume of paper money in the system is the creation of a volcano of inflation.
Of course, for now, deflation (falling prices) is on everyone's lips, and truly is public enemy number 1, as companies go bankrupt and jobs are lost.
But over time as the economy recovers from this deflationary hangover and banks start lending again, there will be tons of paper money, low value, going to feed the markets.
That's when real assets such as commodities and gold certainly will be back in their element. The period of inflation will be a boom for the sector now deflated, and those who hold Gold should be rewarded.
While most of the economic difficulties to date was in the private sector, that soon we will see how Governments around the world will be struggling. Sure, some like Iceland have been affected very strongly.
Just take the United States of America. There are the national debt of $ 10 billion, the 700 million dollars, President Obama fiscal stimulus of $ 1.2 billion and trillion obligations of assistance and social security.
How the Government can respond to these obligations trillions of dollars?
One way is to promise to do so as it does on the actual dollar note.The second way is through taxation, with tax revenue to pay the debt in the future.
But, given the amounts involved, how realistic is this? Bond markets are reporting that they are not convinced that it is possible, as we see bond prices retreating in recent days.
It seems that perhaps the only thing that can be done both for Governments around the world allow debts to be reduced by a surge in inflation by printing more money.
And when this happens, all those paper dollars or euros they will lose their value, their purchasing power.
But all this gold will retain its value while everywhere devalues paper money. These are the lessons of history over the centuries, as gold has held its value.
So as we enter into stormy waters ahead for the global economy, you could do a lot worse than take a closer look at investing in gold.
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