Despite lagging growth in gold (NYSE:GLD), American Century Investments says that gold is still a rational bull market and hasn’t entered bubble territory. In order for gold to continue to rally, ACI notes the importance of these 3 factors:
1. Low or negative “real” interest rates globally (stated interest rates minus the rate of inflation—negative real rates have typically been associated with inflation in the past).
2. Fiscal concerns highlighted by massive debt and ongoing budget deficits in the developed world. These concerns are exacerbated by partisan politics in Washington, and political and social unrest in debt-ridden European countries.
3. Emerging market economic development continues apace, meaning more commodity-intensive growth and inflationary pressure in the global economic system, as well as a growing consumer base eager for gold as status symbol and savings vehicle.
Whether you agree with the logic behind investing in gold (NYSE:GLD), whether you believe it is protection against inflation, dollar debasement, debt monetization, etc. doesn’t matter so much as knowing that there are enough people who do believe in gold as a safety net in an uncertain economic climate — enough people to keep gold shares climbing. As long as the U.S. — and the world — continue to face budget deficits and growing national debt, people will look to gold as the sturdy ship to weather the storm.
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