Inflation or Deflation Ahead? Gold is Still Your Best Investment 04-21-16

Printer-friendly version
Stephen Leeb
Thursday, April 21, 2016

Contrary to what you may have heard, gold performs well in both inflationary and deflationary times.

Personally, I believe we've got the potential for massive inflation in the years to come. I predict China's control and hoarding of critical resources—along with their determination to make the gold-backed yuan the global trade currency of choice—will lead to HUGE inflation in the price of commodities.

But suppose I'm wrong?

After all, the world has faced more than its share of deflationary scares during the last decade as the West has struggled to recover from the Great Recession. For some countries, the deflationary signs are unmistakable as interest rates decline into negative territory.

So, let's suppose the Chinese economy collapses and doesn't recover? Suppose there's a global depression?

So, we don't get the inflation I'm predicting. Instead, we get a massive dose of deflation. If the price of commodities nosedives, would gold still be a good investment?

Yes, absolutely!

You see, historically gold is a safe port for investors to weather out either inflationary or deflationary storms.

The book, The Golden Constant, by Roy Jastram (updated by Jill Leyland) charts the purchasing power of gold in England and America for almost 450 years (1560-2007). What the data shows is that gold always increases in purchasing value during periods of deflation.

For example, take a look at how gold's purchasing power zoomed up during the following deflationary periods in the U.S.:

Simply put: When the world is in crisis and seemingly all hell is breaking loose, gold will help you weather the storm. If commodity prices are skyrocketing, gold is the answer for investors looking for protection and growth. If commodity prices are plummeting, gold is still the answer for protection and growth.

And this leads me to a question I get from many investors...

How does gold compare to other types of investments?

Considering that gold has had a difficult last few years, it may come as a surprise to you that between the beginning of the Great Recession, October 1, 2007 and early March 2016, gold has outperformed bonds, considered by many the most natural deflation hedge, by about 24 percentage points. Gold has outperformed the S&P 500 by roughly 38 percentage points.

Now let's suppose this secret about gold gets out... that it's a great investment during both inflationary times and deflationary times.... and it outperforms stocks and bonds.

What do you think might happen to the price of gold then?

Americans might come to realize that in a dangerous world gold is necessary to protect one's wealth and that gold may be the only path to increasing one's wealth. In that case, the price of gold could rocket to the moon.

I'm predicting gold could hit $5,000... $15,000... maybe all the way to $20,000 an ounce in the years to come.

And, yes, I understand you might be skeptical about my prediction. After all, this information is NOT being reported in the mainstream media.

However, we've frequently seen how slow the media (along with many financial advisors) are to react to change. Don't get caught off guard. I urge you to do your own research and decide for yourself if we really are at the beginning of a gold bull market of a lifetime.