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The US Fed is printing massive amounts of money with no signs of stopping in sight. In fact, for 30 years up to 2008, the entire money supply grew at an annual rate of three percent. However, since 2008, the supply of money has grown at an annual rate of 10% – that’s more than triple the annual rate prior.
2008 was supposed to be an anomaly – the first-ever trillion-dollar deficit – as a result of the financial crisis, but in 2020 the USD ran its first-ever multi-trillion dollar deficit.
What does this mean?
The dollar has lost 96% of its real value, where the equivalent purchasing power of $1.00 in 1940 is just $0.04 in 2020.
This is a major decrease, and it will only continue to fall as the increasing money supply gives rise to inflation – which is being jump-started by the response to the Covid-19 crisis so far, even without a “second wave.” And, the Rand has depreciated by roughly 40% to the dollar over the last 10-years so as a South African holding Rands you can now understand why you feel so poor relative to the Americans and Europeans.
It’s time to invest in gold
While the buying power of the dollar and rand falls, the price of an ounce of gold has risen from $240 in 1970, to a new high of $1,815 in 2020, a 650% increase.
Gold is scarce, and less than two percent of gold’s total value is extracted from the earth every year. So when more paper money is printed relative to how much gold is mined each ounce of gold becomes more valuable in USD or ZAR terms.
This is why on Wednesday, gold broke an all-time high of $1,815/ounce, as worries over surging Covid-19 cases and the increased likelihood of stimulus cash injection measures from the world’s central banks – known as quantitative easing – lifted demand for the safe-haven metal.
Gold tends to benefit from widespread stimulus measures from central banks because it is widely viewed as a hedge against inflation and currency debasement.
Gold is set to break it’s all-time high
Analysts are predicting that gold will break its $1921 all-time high reached in September 2011 and continue to support gold’s rally well into 2021.
In particular, analysts at Citi Bank are expecting gold’s price to break above $2,000 in 2021 and Goldman Sachs’ projections are similar, betting the precious metal will reach $2,000 an ounce even sooner. So, if you are planning to hedge your bets against the dollar or rand, physical gold is a great place to start.
Revix, the investment platform backed by JSE-listed Sabvest, offers a simple and cost-effective way to invest in gold.
Through Paxos Gold – a regulated and insured tokenised commodity – you can invest in gold with as little as R500 and not have to worry about the custody and insurance burdens of physical ownership.
One Pax Gold token is backed by one fine troy ounce of the highest quality gold stored in high-security, fully insured vaults and you can sell your gold investment whenever you choose – whether that’s in a couple of hours or many years’ time.
Sean Sanders, CFA Charterholder and CEO of Revix comments: “The unprecedented printing of money by governments is why it’s important now, more than ever, to hold inflationary hedges like gold in your investment portfolio.”
“In particular South Africans are seeing their hard-earned rand savings go up in smoke and are looking to investments like gold that strengthen when the rand weakens.”
Revix is an investment platform that brings simplicity, trust and great customer service to digital investing. Our easy to use online platform enables anyone to own the world’s top assets in just a few clicks.
Revix guides new clients through the sign-up process, to their first deposit and first investment. Once set up, most customers manage their own portfolio, but can access support from the Revix team at any time.
For more information, please visit www.revix.com
Featured image: Supplied
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