How Next Bull Market in Gold Prices Could Begin
After a stellar start to 2016, gold prices have pulled back a little. With this, the negative sentiment towards the precious metal is back; we are hearing about how there could be more downside again.
Don’t get lured in by the noise! Here’s what you really need to know: gold prices are setting up to soar big-time. You will kick yourself later if you don’t pay attention to the precious metal now. This may sound bold, but the last bull market in gold prices we saw after 2002 may look menial compared to the one that’s coming.
While there are many reasons to be bullish on gold bullion, one of the biggest phenomena that could take gold prices to $2,000 or even higher are the central banks. I know I have said central banks have been buying gold, but know that it won’t be their purchases that cause gold prices to skyrocket instantly—though their purchases will definitely make the gains sweeter. Instead, it will be their monetary policies that will cause the yellow precious metal to soar.
Dear reader, before going into any detail you have to remember two things about gold bullion:
- Gold is a global currency; it’s accepted (bought and sold) and recognized across the globe
- When the fiat currency “dies,” gold will come to the rescue
As it stands, central banks around the world are involved in a deadly process of devaluing money. They think it’s the only solution to save their economies; they are printing money and lowering interest rates. Currently, we have five central banks that are implementing a negative interest rates policy (NIRP), some of which are outright printing money.
What’s worse, NIRPs look to be infesting the global economy. We see many central banks talking about them—they may not be implementing a NIRP soon, but don’t take this lightly whatsoever. To me, it says they could be open to this uncanny monetary policy.
You must understand what “NIRP” really means. At the very core, it essentially means that economy’s money has no value. In fact, if you think about it, a NIRP makes keeping money a liability. It kills the savers.
How Could Gold Bullion Help?
Know that gold holds value. Don’t think it’s true considering today’s gold prices? Well, then look at gold prices in the South African rand. The currency has faced severe scrutiny over the past few years and currently trades at its lowest level in many years against major global currencies.
What happened to gold prices in South African rand terms? They increased. In 2013, an ounce of gold could be bought for 13,000 rands in early 2013. Now, an ounce of gold costs close to 19,000 rands. This represents an increase of well over 45%.
As more central banks around the world continue to devalue their money, the demand for gold bullion will increase. Know that the scrutiny in the gold market in the last few years has caused a lot of damage to future gold production as exploration spending has taken a severe hit. This is a perfect recipe to send gold prices much higher—and $2,000 gold could be something we reference when we recall the days gold prices were low.