Why invest in gold bullion for inflation protection at this time?
November 16, 2010 – The rapid growth in gold bullion investment reflects a growing fear of inflation and the new stimulus seems to have only aggravated those fears. Yet similar measures that Japan has been taking for a decade have not resulted in inflation and our government’s efforts to hold down interest rates should be expected to ward off the threat. So why are the experts recommending investing in gold bullion for inflation protection at this time?
In the first place the message is not one of “head for the hills,” but rather a precautionary note as is typical of the conservative and ever hopeful advisers. One reason to be concerned is that inflation is an appealing solution to some vexing problems for which Americans politicians have been given a strong mandate to fix. Growing jobs through exports is probably better for the economy in the long run, but inflation would have a more immediate and visible impact on reducing unemployment.
Inflation would also create the perception of reduced debt, which would be represented by cheaper dollars. Economic experts understand that such quick fixes invariably carry a high long term price tag, but politics makes them almost inevitable.
An even more compelling argument for taking a stronger position in gold bullion now is that the long deflationary period we have experienced for over a decade must eventually reverse into a cycle of inflation. Although opinion on when that will happen varies widely, it is bound to happen. When it does, the change has historically been very swift.
There is really no excuse not to be proactive. With interest rates near zero, gold bullion investments already promise stronger returns than traditional assets. It simply makes sense to buy gold bullion today when the risk is low and be protected whenever the pendulum swings.
