Kitco: Gold Has New Momentum as its Utility Grows in Global Trade

Investors have many reasons to make gold a core portfolio holding. Over time, gold tends to hold its purchasing power against inflation. Investors who buy gold at the low of a price cycle can fare even better.

However, there is another trend at play right now that could allow gold to continue to lead higher. Central banks are increasingly buying gold as a holding for their portfolios. That trend has continued strong.

Gold remains a monetary asset. While not used in daily trading, it could be accepted the world over.

And since gold doesn’t have the inflationary potential of fiat currencies, it’s attractive. Governments looking to diversify their currency holdings like gold.

Because central banks buy in scale, they can be the biggest driver of demand. Governments are looking to diversify because the U.S. dollar isn’t as attractive anymore.

The U.S. can cut countries out of dollar payment systems, as they did with Russia. And the high level of government spending in the U.S. could create a dollar crisis down the line.

Gold could even become used for settling global trade, particularly in exchange for other commodities such as oil. That could reduce other countries printing so much money, and lower their inflation.

While this doesn’t mean the end of the dollar as the world’s reserve currency, it’s a sign that it will trend lower. And gold, and gold-related investments, are likely to move higher.

To read the full analysis, click here.