Gold Price: 9K to 18K: Double Money Printed

Gold Price: 9K to 18K: Double Money Printed in the world Economy in the past 2 years only

Just 2 years before in 2007, the gold price was Rs.9,000 per 10 Gram. And today in 2009, it is Rs.18,000 per 10 Gram of Gold. I know that many of you may think that, What a fantastic returns, the gold has given in past 2 years only. It is 100% return in just 2 years right?

And after watching the staggering appreciation of Gold, many people have increased the gold allocation of their portfolios. Many have liquidated their equity portfolios and allocated all of their money into gold. But well, this is a false thinking.

Do you know that why gold price has doubled in just last 2 years only? This is because the US Government has doubled it’s Monetary Base (Money in Circulation) from $ 800 Billion to $ 1.7 Trillion in just 2 years only.

It means that the US Federal reserve has printed money in the true sense this time. And because of this printing activity of the US Government, the newly printed money has diluted the purchasing power of the existing dollars in the circulation and this is the cause of the Gold price has been doubled in past 2 years.

In 1971, President Nixon has removed the Gold Standard and thus the Dollar became a free float currency. After that governments from all around the world have stop following the gold standard and that’s why today the modern money (Currency) is backed only by the faith of governments only.

Now, this doesn’t mean that you should stop investing in the Stocks. Equity has outperformed any other asset classes even gold in returns in the long run. No other asset class in the world has ever given the returns like equity in the long run.

One day, the US Government will absorb this terribly flowing dollars from the circulation and that day the price of gold will again fall back to the previous levels. But this is not the case of Stocks. If you have invested in the stocks of fundamentally strong companies than you will definitely get much more returns than the gold in the long run.

This is proven. According to the rule, You should not allocate more than 10% of your Total Portfolio net worth in Gold. Gold can protect the purchasing power of your money but it doesn’t give you any capital gains in the long run.

So Stay Invested in Equities for Better returns in the future…!!!