Trillions and trillions of new paper is flooding Wall Street. While it’s working to stabilize world markets in the short term, it will result in longer-term debasement of paper currencies. And it’s making gold the place to be right now.
Here’s the interesting thing. Gold is normally a hedge against inflation and financial catastrophe, but it’s really not acting out its part very well. Gold stores are up. Investors are so preoccupied with the financial meltdown and the short-term weakness in the economy, that they’re ignoring the coming inflation.
Gold has moved up a little over the past few weeks, but it pulled back Tuesday and gold stocks have been hammered mercilessly. This is partly due to the drop in commodity prices that has negatively impacted gold shares.
Now is a great time to establish a position in undervalued, low-cost producers of gold.
The currency markets can’t be trusted to reflect the true nature of this reinflation and currency debasement. The reason is simple - all the major currencies - yen, dollar, euro and pound - are inflating in unison, so it’s not just more dollars out there. There are trillions of new pounds, euros and yen as well.
Yamana Gold (NYSE:AUY), Kinross Gold (NYSE:KGC) and Agnico-Eagle Mines (NYSE:AEM) should all benefit from growing gold demand. And if inflation does start to rear its ugly head again, gold should be the place to be.