The Case for Investing in Gold Today

"People rightly buy gold when they see inflation ahead," said William Rees-Mogg, a former advisor to Margaret Thatcher and editor of the London Times, at a recent meeting of private investors.

In fact, with the world's major central banks now struggling to maintain their inflation targets, the current lull in gold prices could prove a "table banging opportunity" to buy gold in "decent amounts" as John Reade at UBS has said.

If you're looking to store wealth in something both rare and secure today, you will find nothing to match gold.

Gold always tends to reward cautious savers in times of financial stress, because it is both hard to destroy and tightly supplied. In short, it is the very opposite of debt.

Gold doesn't corrode or tarnish, and it's relatively useless to industry. That's why almost all of the entire stock of gold mined over the last 4,000 years remains unused today. It exists as either jewelry or bullion, both of which act to store wealth and value.

The world's total store of gold now stands near 160,000 tons. But the metal is so dense that, if formed into a single a cube, it would have an edge barely 22 yards in length. That wouldn't even cover a tennis court!

Gold vs. Paper-Money Inflation

New gold is being found and mined today at the rate of some 2,600 tons per annum.

That's a modest increase of 1.6% per year to the above-ground supply. And critically for the value of gold, this annual growth-rate lies beyond the power of politicians or investment banks to increase.

The supply of Euros, in contrast — the most hawkishly-managed major world currency right now — is currently expanding by 11.5% per year.

Thanks to this tight supply, gold grew its purchasing power more than nine times over during the 1970s — the last worldwide surge in inflation. In terms of business assets, it rose 23 times over by the start of 1980 as measured against the Dow Jones Industrial Average.

During the financial collapse of the 1930s - but this time amid a deflation caused by half of all banks in the United States failing - gold bought 17 times as many financial assets as it did before the Great Crash of 1929.

Now debt defaults and inflation are working together today, forcing a fresh crisis in the value of money. Gold has already risen three-fold against the New York stock market since early 2000. It's recently turned higher in terms of residential and commercial real estate, too.

New Investment in Gold

Gold doesn't care whether a financial collapse destroys the value of money (inflation) or the value of debt (deflation). Its unique characteristics - indestructibility and tight supply - mean its owners can thrive amid either.

New gold investment continues to grow as the world's major currencies - gold's main competition as a store of value - continue their plunge into the inflationary spiral.

Until there's a dramatic change in monetary policy, the over-supply of Dollars, Euros and Yen look set to keep pushing gold prices higher. And it took a dramatic change in central-bank policy to finally kill gold's last inflation-led surge.

At the start of the 1980s, the Federal Reserve pushed US interest rates up to 18% and above, restoring the world's confidence in its currency and kick-starting the "long boom" of the next 20 years.

Could America survive such strong medicine now? Would Ben Bernanke even dare risk it?

If you think the world's central bankers are about to set interest rates far above the real rate of inflation, you should steer well clear of gold.

But if you fear for your savings - and you want to start investing in gold - you can start today, for free, at BullionVault.