With the current stock market woes you would think that gold prices are falling at an alarming rate. However, the truth is that when compared to stocks and bonds, stocks are way more attractive.
Well, yes, you may think that stocks are just as safe as bonds but there is a big difference between bonds and stocks. There is a big difference in the potential for you to earn from investing in stocks versus bonds. Bonds and stocks are very different beasts, much different than many people realize.
Now that stocks have rallied to new highs the question on the minds of all of us is how long can they hold up? The stock market is very volatile and it is quite possible that if you let the stock market crash you may end up losing more than you are making.
So, you see, stocks are a short term play at best. But gold prices are very high right now because of the demand for it.
Why is the interest rate still low? Well, it’s because interest rates are down, a lot of banks are offering interest only loans and lower on time deposits. Banks want to get rid of these types of problems and they are willing to make more money with more risk in order to do so.
Interest rate gives them an easy profit. If they get more deposits with low interest rates and zero on time deposits they can make more money. If the interest rate goes up on them it will drive up the value of their gold prices because of its demand.
When you look at it that way the issue becomes clear. Sooner or later banks will have to raise interest rates, will lower their interest rates, and maybe even foreclose the homes of millions of people who cannot pay the monthly mortgage.
Either they will make more money with no risk involved or they will have to risk it and that will cause the stock market to crash. The impact on gold prices will be far less severe because gold prices are more liquid and easier to sell.
With gold prices in the mid teens you can expect them to go higher and they could climb into the twenties, if not higher. Many investors are still buying gold because of the seemingly endless supply.
If you are holding gold then you know that you need to invest in it now and not wait until you need to borrow more money. When you are looking at a gold investment, it is wise to take some professional advice before you make any purchase.
Stock prices may rebound, but when you consider the potential to earn from investing in gold you may find that your interest rate outlook has improved. As long as you take advantage of higher interest rates you should make a handsome profit.