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Click to enlargeWhy Are People Buying Gold


The recent rise in gold prices seems to be a response to the public's fears of economic turmoil. When historically "safe" savings vehicles, such as bonds, cd's, money markets and bank deposits, look shaky and offer scant returns, gold has growing appeal as an alternative store of wealth. Gold also looks like an attractive bet either way the monetary policies and stimulus programs pay out. If drastic cuts in interest rates work too well, that will inevitably fuel inflation. If interest rate cuts do not do the job, prices of assets such as stocks and houses, will further deteriorate. To fund the TARP or Troubled Asset Relief Program, the Federal Reserve will need to sell billions of dollars in bonds. Selling these bonds will flood the market with money, and inflation occurs when too much money chases too few goods.

Why are some people buying gold nuggets instead of coins or bullion?

For a growing number of people there is an inherent fascination in natural gold nuggets. Some see history in their hands when handling nuggets - a call back to the wild west times which very much helped found our country. Others see money from nothing - gold taken out of the ground is new money untouched by man. Unrefined and raw it is attractive in its sheer simplicity. There is little thrill in holding a coin or bar that has been processed or machined. However, every natural nugget is unique - no two are ever alike and that appeals especially well to the gold collector.

We advise everyone interested in acquiring natural raw gold to purchase the largest nuggets they can afford. Size is a direct relation to rarity. The vast majority of gold is in dust or flake form so large nuggets definitely are more scarce and thus more valuable. Larger nuggets often carry a premium over spot price due to rarity. Some gold can even be found in different forms such as fascinating crystalline or geometric structures. these types of gold are exceedingly rare and are often valued not only by weight but by appearance.

How high could the price of gold go? Gold bugs talk excitedly about it reaching $2,300, which would match the January 1980 peak in real inflation adjusted terms. Already the gold price is above its average since 1972 when calculated in today’s money. There is of course a limited supply of gold and lots of potential buyers. This makes for ideal conditions for a bubble. If gold is burnished by grim news, it seems likely to become still more alluring. Always be sure to diversify your investments.


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