Commodities – Why Buy Gold?

For a very long period of time, inflation has remained low, despite high liquidity, low interest rates, prices of commodities and increased supply of U.S. dollars. This is because the cheap labor in developing countries like China helped offset production costs generated by the prices of commodities. However, with the currencies of developing countries such as the RMB appreciates against the U.S. dollar, wages tend to grow.

To offset rising inflation, workers demand higher wages to higher cost of living and this cycle will feed themselves until something drastic happens to limit the rising cost of living . Consequently, wage inflation will most likely happen in the next decade as these tensions are increasing.

In addition, workers in developing countries more educated, they form unions to protect themselves. Under pressure from workers and their unions, employers are likely to yield, thus inaugurating a new era of inflation, while wages will continue to increase. However, governments can not stop it because he must win the support of workers who are the backbone of its economy.

So, to protect against inflation, there will probably be a gold rush and it is best that investors can join the movement of wealth sooner than others. Currently, gold prices around U.S. $ 1.300 ounces, which is already very high. For now, it might be a bit late to buy gold, but it is likely that gold prices could reach higher levels in the future.

To add, in response to this, other countries will be forced to print more of their currencies to increase the price competitiveness of their exports to the dollar, which led to global inflation. If the U.S. happens to devalue the dollar too, the U.S. dollar loses its value as a reserve currency in the world, causing demand for the U.S. dollar to fall and demand for assets such as gold. Thus, it is possible that under such circumstances, the price of gold will increase in future.

In addition, the weakening U.S. dollar and other currencies could increase the price of imports, making imported inflation. To ensure that export revenues and eliminate trade deficits, countries may become more protectionist and even trigger trade wars, the worst case. If this occurs, production costs increase as more countries use their export products rather than cheaper alternatives offered by other countries. This will increase inflation, which causes fear, which will increase the price of gold.

To conclude, I hope readers will find valuable information on the possibility of higher inflation in the future. Historically, gold prices will rise with inflation. Therefore, I believe that gold will be a good bet that the new era of inflation takes place. However, there will be setbacks for gold investors to consider.