Gold has always been a more difficult to track and understand resource in the economy. This has kept many investors at bay when it comes to investing in it, for fear of it how unstable it appears at times. Dawn J Bennett recently had Jeff Snider, Head of Global Investment Research for Alhambra Investment Partners, on her radio show and Jeff helped illuminate us on how gold needs to be viewed in our current economy.
First, here are the important facts to give you some background. In 2011, gold was approximately $1900 an ounce and today it is around $1180 an ounce. That’s quite a big shift, so naturally there are a number of questions regarding why the price has changed so much in a commodity considered as valuable as gold. Snider explains to Dawn J Bennett and us that gold was so extremely high back then because of the lack of confidence in the stock market and economy as a whole, so people invested in gold because it was considered more secure. So as the economy has improved a bit the value in gold has collapsed, but now there is a new question. Is the Fed currently suppressing the price of gold to make the dollar look stronger?
If they are doing this then we could be deceived by how well the economy is actually doing because they don’t want us to realize how poorly the economy is actually doing. Snider says it’s rather difficult to be certain where the price of gold is being affected because of how the selling side is a wholesale system. The issue is, when people buy gold, it’s against extreme risks and right now there is less fear in the market, so there is less buying. Part of this less fear issue is because of the positive job market results which the government has been giving out each month.
Unfortunately, these positive job results are a bit misleading in the way they report their numbers. They aren’t telling us how many of the jobs are full-time versus part-time and we don’t know how well paying they are. So even if we are adding jobs, if they don’t pay well then it’s hard for these workers to make ends meet and contribute. Wage growth has nearly flat lined for several decades now, too, making it difficult for regular people to keep up with inflation and the rising cost of living.
So without a doubt, we know the economy isn’t doing as well as is being reported in the mainstream, so perhaps right now is a good time to invest in gold while it is still cheaper.