Tickle Me Elmo Provides A Supply And Demand Lesson That Investors Should Consider When Purchasing Gold And Silver
Do you remember the famous Tickle Me Elmo doll, that was originally retailed at $28.99 but due an enormous consumer response, resulted in an all out mob mentality, where retailers and consumers were seriously injured and prices for the doll rose to as much as $2,500/doll. Looking back, we may all roll our eyes and chock it up to pure insanity; however, the Tickle Me Elmo doll provides an important lesson in supply and demand. Let’s just say that the manufacturers made millions of the dolls, and Toys R Us, Walmart, and Target had such a surplus that they could never get rid of all the dolls during Christmas of 1996. Come January, Tickle Me Elmo would have hit the clearance shelf going for a fraction of the original price, because supply was greater than demand. Investments such as gold and silver follow a very similar pattern and will reflect highs and lows in supply and demand.
Increased Demand For Gold Drives Gold Prices Up
Gold for example, has different times when its supply and demand ratio is either great or small. When economic times are good, and there is little inflation, gold demand will be low, which drives down the prices. However, when things are looking rough economically around the world, gold demand goes up, which concurrently drive gold prices through the roof. The current supply and demand for gold is creating a situation where gold is a lot like the Tickle Me Elmo experience of 1996. Very soon, gold will be so sought after that prices will be as high as 2700/oz or higher.
What Is Driving Gold Prices?
Many factors have influenced the growing attention on gold and silver. Some of these include:
-The International Monetary Fund has recently downgraded global growth.
-The Middle East is a powder keg waiting to blow up.
-The U.S. has approached is debt ceiling, and is awaiting the fiscal cliff, which is dragging the economy down.
-Europe is in deep financial and political distress
-Japan and China, the world’s 2nd and 3rd largest economies are slowing down, or currently in economic trouble.
Gold Prices Go Up Proportionately To Inflation Rates
Another driving factor in the gold prices is the inflation rate in the U.S. and other parts of the world. When times get tough, the Federal Reserve and the ECB resort to money printing. Now, money printing may not look like green backs flying off the printing press, but it could look like a government purchasing its own bonds to finance debt. In either scenario it adds to the monetary supply, which decreases the purchasing power of the currency. The U.S. and Europe alike are in danger of some major inflation in years to come due to devaluing their currency.
Economic Hardship Drives People To Purchase Gold And Silver
During weak economic times, governments, banks, and individuals alike are driven to make large purchases in gold and silver. China is already buying gold up to back the Yuan. However, gold is a relatively small market and has limited resources that make it difficult to keep up with rising demand. As a result we will likely see gold prices go up exponentially in upcoming months. For more information on how gold’s supply and demand works and to explore the possibility of holding gold as part of your personal portfolio, speak to a Redhawk advisor near you today.