By Jason Sampognaro, Hard Assets Alliance Analyst
It’s easy to get caught up in the frenzy of the gold market. When prices are skyrocketing to new highs, everyone is scrambling to buy. When prices are falling, it’s as if they’ve run out of lifeboats on the Titanic. Like lemmings, many investors walk off their own personal fiscal cliff by buying high and selling low. To avoid flocking with the herd, it’s key to remember that gold is not an investment at all. It is a rock-solid savings account that beats any fiat paper governments can dish out.
Last week, we went in-depth on why the US Federal Reserve will be printing much more fiat paper in the months and years to come and the effect this will have on the price of gold. The Fed’s actions should be a red flag to anyone who is not currently holding a portion of their wealth in physical hard assets. In case you missed it, you can read it here.
We believe gold will continue to climb higher in the future – a belief you may share. However, it can be difficult to swallow the volatility of the gold market. It’s said that we often fear what we do not understand, so building on what we started in last week’s article, let’s continue to explore other drivers in gold’s price.
In this piece we’ll dig into paper gold, discuss its two most common forms, and demystify how these instruments can cause swings in the price of gold.