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An excerpt from Follow the Money Weekly Radio with Jerry Robinson – 2/12/11

To hear the entire program, click here.

— TRANSCRIPT —

Three Reasons Why I Expect Higher Gold Prices in 2011

by Jerry Robinson

We get quite a steady stream of questions here at our organization about where I think gold prices are going to go both in the short term and in the long term… Right now, there are several analysts who are claiming that gold is in a bubble, or that gold is nearing its peak…

While I do not consider myself a market timer, I do understand market fundamentals. Therefore, I want to share a few reasons why, based upon these fundamentals, I believe that gold is going to continue to head higher in the coming months and years…

The first reason that I believe that gold will head higher is simple… Gold is a beneficiary of poor monetary policies. And do we have poor monetary policies right now? Of course, The Federal reserve is currently pumping in record amounts of new money into the financial systems in an effort to revive our broken debt-based monetary system. The result of such monetary policy has always been the same throughout history… inflation. And, as you probably already know, we are beginning to see the effects of inflation all around us…

As inflation rises, it drives up asset prices. Over time, inflation leads to the destruction of the purchasing power of paper currencies, like the U.S. Dollar. For this reason, history tells us that when investors fear a loss of purchasing power due to growing inflation, they turn to protective hedges like precious metals and agriculture to protect their investments and their cash.

Inflation is an inescapable fact of life under our current monetary system. And hard assets like gold have been, and will continue to be the beneficiaries of any future inflation.

Right now, the Federal Reserve is pouring money into the system and will continue to until they are satisified that the economy is able to stand on its own. Unfortunately, this nation’s economic problems are deep rooted and structural in nature. Pumping more money into the financial system is like giving heroin to a heroin addict. You may think you that you are helping him, and it may even appear that way, but in the end you are prolonging the problem, not helping solve it.

For this reason, I believe that the Federal Reserve’s current loose monetary policies are just the warm-up to where thing are heading… The end result will be big inflation… And with growing inflation will come increasing gold prices.

Number Two… The growing global demand for gold is causing supply constraints for gold. For example, in 2010, global demand for gold soared by 20% while global gold production rose only by 3%. Simply put, the discovery and development of new gold mines is not keeping up with global demand.

Last week, for example, the Financial Times reported that the demand coming out of China for gold had “stunned” traders. China has already reported a five-fold increase in gold imports over the first 10 months of 2010… Some analysts believe that China could surpass India as the world’s largest gold buyer sometime this year…

And its not just China. India, Russia, Turkey, Iran, and many other nations are methodically diversifying their reserves into gold.

So with supplies constrained, production lower, and global demand increasing dramatically, gold is moving headlong towards higher prices in the future.

And finally, number three… Currently, the amount of money invested in gold by global investors is very low… At the end of 2009, the total amount of retail and institutional investments held within gold made up just a microscopic .8 of total global assets. This means that the majority of people have no exposure to gold.

For all of these reasons, I believe that gold will end the year of 2011 significantly higher than when it began…

And I am not alone in my price predictions… The Wall Street Journal has reported that gold could rise some 30% in 2011. And the top analysts at Bloomberg believe that gold will shine in 2011 reaching new highs.

On this program, we always urge you to seek the advice of a trusted financial advisor before making any financial decisions. But if you have not taken steps to protect your wealth from the coming ravaging effects of inflation in this country, I urge to begin now.

The Federal Reserve will not stop the next wave of America’s economic crisis from destroying the dollar and right along with it, your purchasing power…

But if you actually believe that they will, I want you to think about two things… Lehman Brothers and the subprime mortgage crisis. The writing was on the wall for years… but Washington and the Fed did nothing. Considering their dismal track record, isn’t it time that you stopped relying upon them and instead begin creating your own financial game plan?

To hear the entire program, click here.

Jerry Robinson is an economist, published author, columnist, international conference speaker, and the editor of the financial website, FTMDaily.com. In addition, Robinson hosts a weekly radio program entitled Follow the Money Weekly, an hour long radio show dedicated to deciphering the week’s economic news.