"THE PERFECT GOLDEN STORM" Use its force to build your fortune. An array of forces is converging to drive gold toward and probably beyond its 1980 peak of $852 per ounce, creating exceptional opportunities for investors. The table below shows the interrelated forces that are merging into a perfect storm propelling the price of gold; the article then goes on to describe these forces in more detail. Author's Note: This article was completed in April, 2004. Much has happened since then, but the forces it describes continue to drive the price of gold. In fact, in the months since April, some of the events this article predicts have already occurred, such as rising inflation, an increase in interest rates, and further destabilization in Saudi Arabia and attacks on oil production there. The forces converging into a perfect storm Effect of each of these forces on the price of gold Global instability, including Terrorist acts and threats in the US and Europe Ongoing violence in Iraq, Afghanistan No solution to Israeli/Palestinian conflict Shaky Middle East regimes Competing interests of US, EU, Japan, Russia, China Decline of the US Dollar Huge, growing federal debt (Iraq/tax cuts) Huge, growing trade deficit Dependency on foreign financing Interest-rate bind "Jobless recovery" Fed holding down rates to keep debt-fueled economy afloat Low rates make cash a poor investment Increasingly higher rates available in other countries Fed will have to increase rates to finance federal debt Rate increase likely to kill housing market and refinances, main growth drivers Investment climate Investors, burned once, are leery of paper assets, real estate Owning gold legalized for 1.2 billion people in China Jewelry and other industrial demand strong Exchange-traded gold-backed securities launched Limited supply of gold Established mines producing less gold 7-year exploration-to-production cycle Profitable deposits harder to find Mergers of mining companies Central Banks selling less gold Here's how you can buy gold now In April 2001, at the beginning of the current bull market in gold, an ounce of the precious metal sold for $260. By December 31, 2003, gold had zigged and zagged its way to $416 - up 60%. If you had invested in gold in 2001, you'd be celebrating today, especially given the performance of most paper investments. For the same April 2001 - Dec. 2003 period, despite their gains in 2003, the Dow was down 8%, the S&P500 was down 16%, and the NASDAQ was down 14%. Over a period of 32 months, gold had outperformed the S&P500 by 76%. Global economic and political trends suggest that gold has only begun its powerful surge. Many financial experts predict $1000+ gold within the next three years. Gold's 1980 high of $852 is equal to about $1500 in today's dollars. The current price of gold, shown on this page, represents the early stage of a bull market. Put a portion of your assets into gold now and (in addition to the reasons why it's always wise to own gold) you and your family will be celebrating your decision - particularly given the likely fate awaiting stocks, bonds, currencies, and real estate in the next several years. So far, the dramatic rise in the price of gold has been ignored by most financial commentators and by the general public. TV talking heads and your friends, neighbors, and co-workers are not yet buzzing about gold the way they were in the late 90s about tech stocks. To preserve and increase your wealth, buy gold before the herd stampedes. Once "gold" is on everyone's lips, the period of maximum profit to investors will have ended. Buying gold then would be like buying shares in Internet startups after their big run-up. (Except that gold, a scarce element not subject to technological obsolescence, Enronesque bookkeeping, or bankruptcy, always retains significant value and the potential to rise again. A share of stock in many a failed company has plunged to zero or close to it and never recovered; an ounce of gold hasn't sold for less than $250 since climbing past that figure in May 1979.) Let's look at each of the factors converging into the perfect golden storm. The first four - global instability, decline of the dollar, interest-rate bind, and investment climate - increase the demand for gold. The final factor is the decreasing supply of gold. As we learned in Eco 101, increased demand + decreased supply = higher price. Global instability Decline of the U.S. Dollar Interest-rate bind Investment climate Limited supply of gold