Rise in Gold or Collapse in Dollars?

Gold’s spot price passed $2,000 per ounce last week and still sits past the mark. Of course, our clients who have invested in the metal are rejoicing, especially if they bought just a few months ago when it dipped as low as $1,481 per ounce. Its climb has certainly been predicted, yet it still begs a bigger question: is gold really rising or is the dollar collapsing?

Gold is the unpopular investment. Even we at National Gold Consultants place more weight on gold as wealth insurance rather than an investment. Yet, when the Dow Jones Industrial Average and gold are compared, the DJIA is down 70% against gold since 1999 (excluding dividends). The DJIA-to-gold ratio stood at 45 in 1999 and plummeted to 6 in 2011, then corrected up in 2018, but today registers at 14 on a downward slope. Some analysts believe that the long-term trend shows that the DJIA will fall 95% from here in real terms (gold).

When we look at the dollar, we can see just how much power it has lost in just the last two decades compared to gold. In 2000, $288 could buy one ounce of gold. Today, that same ounce costs over $2,000. This means the U.S. dollar has lost 86% of its value in real terms (gold).

So, while in the context of our market and the U.S. dollar it may seem that gold is rising, the truth is that gold is a constant and the dollar is collapsing. In fact, most world currencies have lost significant value against gold over the decades. Unlike our fiat currency and that of our global neighbors’, gold has intrinsic value and has maintained it well over decades (as shown above) and centuries (as shown in history books).

Though it may have recently been the unpopular investment, some analysts believe that may change within the next few years. With economies and currencies suffering while gold continues to stand tall, more investors will turn to gold. And with many other assets being overvalued and gold being so undervalued – it currently holds only 0.5% of global financial assets – coupled with the shortage in supply we will face as the demand rises, gold’s power will grow in leaps and bounds.

Nearer term, gold is still expected to rise to $3,000 per ounce, so there is still time to position yourself or your clients in physical gold and silver with great benefit. If you would like to better understand gold and silver's path ahead as an investment or as wealth insurance, or discuss ways to approach these topics with your clients, call our team today.