I will start with the world’s largest economy and our trusted world’s so called reserve currency, The US dollar. An article once published by an author I don’t remember currently is that every second the US government spends $16,000 more than it raises in taxes. So if you do the normal math
1 debt second = US $ 16,000
1 debt year = $500,000,000,000
These figures are just the budget deficit. Now if you understand economics, there are other deficits like the trade deficit which is worse than the budget deficit itself. It grows as Americans buy consumer goods and export dollars. Not so many foreigners buy American goods but widely believe that US produces the best money. That is why it is dollars which are being exported all over the world.
This will only last for a few years, when you can buy anything in the world on the cheap because all anyone wants is your money or your notes, to act as a better store of value than their own. But this will not last for long. Consider you getting paid and then you spend it and the store pays someone else who spends at end up at another store. But what if everyone spent 80% and saved 20% in the bank? The flow of money would diminish. All the money would end up in the bank, the stores would shut and we'd all be out of work.
The global derivatives market is estimated more than a $300 trillion, now that’s a lot of pile of money. A simple explanation to of a derivative market is currency specific denominated bond is unsecured currency specific debt which needs to be avoided especially when you see the power to devalue the currency rests with the institutions that has issued more bonds. However the risk is mostly secured where each side have made undertakings to each other, which they expect to be able to honor. When all the derivatives trading started it was around $5 trillion back in the 1986 and now $300 trillion which is more than 50 times today. A funny thing, is that whenever they explode, everyone loses all their money, a simple example was the gulf bank of kuwait who lost in their derivatives trading (Kuwait’s Gulf Bank May Have Loss as Derivatives Contracts) a whole new bill or legislation gets passed by ruling country’s politicians who want to make sure 'it never happens again'. But that never works either. After any big bust or a market crash, everyone gets cautious and derivatives disappear for a while. This is a powerful natural cycle.
Gold cannot be replicated. It can only be produced and it’s a scarce natural resource. The demand for gold supply is in competition with its demand. Let us examine a few charts below
30 Year Gold Price indicator in US Dollars
5 year Gold Price in Kuwaiti Dinars
The above charts are gold prices from the last 5 - 30 years from US Dollar and UAE Dirham and Kuwaiti Dinars. These charts are the inflated adjusted prices.
Now consider this. the money sitting in your banks which is being paid with interest is losing its purchasing power. When I say loosing the purchasing power, it is because the injections of money being put into the system to jump start the economies by the world central bankers. It will start the economy but will give rise to inflation and with this history repeats itself in all the usual ways that is making more and more people buy gold because gold is the actual money. They are alerts by trading signal and indicators and they are afraid of currency devaluation, frightened of bond defaults, and frightened of the rising of a severe financial crisis from derivatives which is what Warren Buffet described the financial weapons of mass destruction. Gentlemen, when you see such a move, it is time to think from a broader perspective.
Gold has one serious utility and that is it is reliability and its rarity. And that's what ordinary savers look for when they want to store future purchasing power. If you had brought 1 troy ounce of gold back in 2005 (1 troy ounce = 31.103 grams), it would have cost you less than 150 Kuwaiti dinars. Today, the same costs your 359.51 Kuwaiti dinars. That’s twice of what you could own back in 2005 than what you can buy today.
To me this supply of a natural resource which maintains its rarity for thousands of years is diminishing while the demand booms, to me gold market looks like it is about to explode and it’s just a matter of time.