GOLD: The Lowest Risk Investment

I have clients that are hesitant about buying gold at these "high" prices for fear of it dropping in price after they buy. But in my opinion, gold is the lowest risk investment available during our lifetimes.

Why do I feel this way?

I think the answer is best summed up in an article from Eric deCarbonel entitled Gold Market Reaching the Breaking Point.

China is now the fastest growing market for gold, with Beijing's gold markets reporting record sales. As the Chinese economy rebounds from the global recession this year, China is overtaking India to become the world’s top gold consumer. The Chinese authorities are reinforcing this strong demand for precious metals by pushing their citizens to buy gold.

China’s main state-owned television company is promoting gold and silver as an investment. The government is telling its people to buy gold. What's more, every bank will sell gold and silver bullion bars in four different sizes to individuals, and China's largest bank, the ICBC, is setting up a precious metals department to handle growing investor demand.

And if the Chinese authorities are pushing gold as an investment to their citizens, it obliges them to 'protect' the gold price. It would be tantamount to a betrayal if it fell, never mind the loss of all-important face that would result. Just as the US and the UK stepped in to bail out its banks, so China will be duty bound to prop up gold.

But the surprising strength we have seen in gold over the summer – we never really got the summer low I was looking for – suggests that somebody is already 'buying the dips' anyway. Indeed, the gold price has this week repeatedly gone through $1,000 during overnight trading, only to fall back when the US markets open. That indicates that the buyers are out east somewhere. I have written about this before: Gold is shifting from West to East – along with the balance of power.

When you have the largest country in the world, with the fastest growing economy in the world, and who virtually owns the United States, that is propping up the price of gold, I'd say it is a pretty safe bet right now that those who worry about buying in at the top of the market are worrying about a non-existent risk.