Eleventh Consecutive Year of
Higher Gold Prices a Shoe-in
Monday, December 12th, 2011
By Michael Lombardi, MBA for Profit Confidential
The year 2011 will mark the 11th consecutive year that gold bullion prices have closed the year higher than they started the year. Here are the raw numbers, the closing numbers of the price of gold bullion per ounce every year since 2000:
2000 – $273.00
2001 – $279.00
2002 – $348.00
2003 – $416.00
2004 – $438.00
2005 – $520.00
2006 – $638.00
2007 – $838.00
2008 – $884.00
2009 – $1,092
2010 – $1,405
2011 – $1,680 (current date)
When we look at raw gold bullion price data, we see that the big price gains in gold bullion started in about 2009, after the Federal Reserve responded to the credit crisis of 2008 by significantly increasing the money supply.
Each year that passes, I hear the same story from a group of my readers: “I missed the rally in gold bullion prices, it’s too late, and I’ve lost out.” In my opinion, nothing could be further from the truth.
I still believe that the biggest price gains for gold bullion lie ahead. Why?
The impact of the Fed’s actions in respect to increasing the money supply has yet to hit the “official” inflation numbers. After spending $2.3 trillion to buy U.S. government Treasuries, a survey of the biggest U.S. bond dealers by Bloomberg (11/28/11) says that the Fed will buy an estimated $545 billion more in mortgage securities in the first quarter of 2012.
Dallas Fed president Richard Fisher and Philadelphia Fed president Charles Plosser have both publicly come out against the Fed printing more money to solve the country’s economic problems, as money printing leads to inflation.
As I have written many times, the prices of quality gold producing stocks have lagged the price performance of gold bullion. I’m looking to 2012 as year the price of gold bullion rises sharply, as the impact of a greatly expanded money supply results in rapid inflation.
When President Obama took office, the national debt stood at around $10.0 trillion. When Obama’s first term has expired, the national debt will be in the $15.0-trillion to $16.0-trillion range. In four years, the Obama administration has increased the national debt by 50%. Doesn’t this action of increasing our debt so aggressively send down the value of U.S. dollars? Doesn’t this lead to inflation? The answer is “yes” to both questions, my dear reader.
When dollars go down in value, gold bullion rises in value. When inflation rises, gold bullion prices rise in value. If you think increased government debt and multi-trillion-dollar increases in the money supply will not create inflation, then you shouldn’t be in gold bullion. If, on the other hand, like me you see the significant increases in government debt and the money supply as inflationary, the shares of quality gold producing companies look quite attractive for 2012. (Also see: Top Five Reasons Why Gold Bullion Prices Will Move Even Higher.)
Next Post: A Few Numbers That Say aThousand Words About 2012
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Tags: federal reserve, gold bullion, gold prices, gold producing companies, how to invest in gold
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Michael bought his first stock when he was 17 years old. He quickly saw $2,000 of savings from summer jobs turn into $1,000. Determined not to lose money again on a stock, Michael started researching the market intensely, reading every book he could find on the topic and taking every course he could afford. It didn’t take long for Michael to start making money with stocks, and that led Michael to launch a newsletter on the stock market. Today, Michael only employs the top market analysts and editors. Some of our recommendations have posted gains in excess of 500%! Michael has authored and published over one thousand articles on investment and money management. Along the way to building Lombardi Publishing Corporation, now with over one million customers in 141 countries, Michael became an active investor in real estate, art, precious metals and various businesses. Readers of the daily Profit Confidential e-letter are offered the benefit of the expertise Michael has gained in these sectors. Michael believes in successful stock picking as an important wealth accumulation tool. Married with two children, Michael received his Chartered Financial Planner designation from the Financial Planners Standards Council of Canada and his MBA from the Graduate Business School, Heriot-Watt University, Edinburgh, Scotland.Follow Michael and the latest from Profit Confidential on Twitter
