You may recall that gold cost 250 US Dollars per ounce in 1999. Remember, one ounce is 31 grams. It will now cost you around 1085 US Dollars for an ounce which is a price that has increased more than four fold in eight years. So, is it too late to but any? And how do you invest in this precious metal?

A small snapshot of the gold market: following a peak of 1200 US Dollars in Nov 2009, gold has remained at the 1080-1120 US Dollar level which are historical levels. At this price, despite everything, hasn’t the gold shot its load? Isn’t it too late to get on the market?

If you look at the price increases and decreases, there is still an enormous potential because the 1980 record price was 850 US Dollars. When adjusted for inflation, 850 US Dollars would be the equivalent to 2,200 US Dollars nowadays. That still leaves some growth potential.

However, this has to be considered in context: 1980 was just prior to the Iran-Iraq war so conditions were also very special and the price fell by 40% during the next two months. Gold can be very volatile. However, the current increase has been more constant and this leads us to believe that there is real demand and real growth potential. Société Générale analysts forecast that gold could increase by 50 -100 US Dollars per year for the next few years. These same analysts suggest that 5 – 10% of a portfolio or wealth should be held as gold.

Every forecast of inflation and, more particularly, deflation suggest that the price of gold will rise.

Tags: Gold, inflation

This entry was posted on Wednesday, December 23rd, 2009 at 3:23 pm and is filed under Gold, Investment. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.