Why Gold Will Go Up

Gold has continued to go up over the last couple of months and now sits as at close to a 10 year high. Will it continue to go up? I believe so and here is why:

• Many economists, including Alan Greenspan expect inflation to pick up over the next couple of years and especially over the next couple of decates. Global demand for resources is simply too great and is outstripping supply. Gold tends to do well in times of higher inflation.
• Global instability favors gold. The international picture isn't getting any calmer with Iran developing nuclear weapons and the tension in the Mideast getting worse. Gold does well in times of instability.
• There is demand for gold. Gold continues to be used in industrial production and as jewelry. As developing countries such as India and China continue to grow so will the demand for gold.
• Assets are shifting into hard commodities like gold. Just look at the chart from this interesting editorial. It shows that the ratio of gold prices to the Dow has been dropping over time. That is, it is taking fewer and fewer gold dollars to buy a Dow dollar.

The days of a savvy investor putting their money into just stocks, bonds, and mutual funds should be over. Any investor that truly wants to be diversified should consider holding some commodities, and gold is one to consider.