During a CNBC interview, former Federal Reserve Chairman Alan Greenspan said gold prices are surging because investors are looking for hard assets that they know will have value in 20 or 30 years.
Gold is up more than 21% on the year and is trading at levels not seen since 2013.
During the interview, Greenspan focused on an interesting fundamental he thinks is driving both the bond and gold markets — the aging population. He said there has been a shift in time preferences as people recognize they will likely live longer and they will need to finance those longer lives. This, he says, is increasing the demand for hard assets like gold.
One of the reasons that the gold price is rising as fast as it is … that’s telling us essentially that people are hard resources which they know are going to have a value 20 years from now, or 30 years from now as they age, and they want to make sure they have the resources to keep themselves in place. That is a clearly fundamental force that is driving this.”
Historically, gold has served as an inflation hedge and a wealth preserver. It makes sense that investors concerned about maintaining their savings well into the future would turn to gold. This is especially true given the likelihood of increasing inflation as the Federal Reserve continues to try to prop up the economy with low interest rates and quantitative easing.
Peter Schiff has said that eventually, the world will drown in an ocean of inflation.
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