As part of a new series showcasing insights from top financial experts, this article was contributed by financial strategist and founder of Weipedia, Wong Kon How.
Why does Gold keep trending up?
Gold has broken its key resistance at US$2,000, established four years ago, and is poised for more historical highs in the coming years. Gold and silver have been considered forms of money for thousands of years, dating back to ancient civilizations. Today, we can still exchange gold for the Singapore dollar or any other currency at local bank bullions.
Addicted to money printing
As countries engage in massive money printing through quantitative easing, which started in 2001 with the Bank of Japan, the US followed suit in response to the subprime crisis in 2008. Given the initial success in the US, this model has been adopted by many other countries.
Quantitative easing involves the central bank purchasing government debt. This creates liquidity for the markets and funding for government expenditures to resolve short- to mid-term crises, but it can also lead to long-term inflation when excessive amounts of money are printed.
Market Insights
Can we reduce the pace of money printing?
I believe we share the same answer, which is quite unlikely. As long as money continues to be printed to meet urgent needs, currencies will become diluted over time, and inflation will continue to trend upward. Therefore inflationary hedge assets like gold and silver will also continue to trend upward.
Are we chasing high prices in Gold?
Whenever currencies dilute or weaken, inflation rises, or gold prices increase. If chasing a rising price is not in your trading mandate, consider its laggard counterpart, silver. According to studies, when silver prices start to increase, they tend to multiply more significantly than gold. Discover why silver always lag gold through this video.
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