Whenever an economy is struck with recession it has a negative impact on the overall business activity. Fed usually deals with the recession by pumping in money in to the economy and reducing interest rates. This reduction in interest rates result in the devaluation of the currency and increase in inflation. As constituents of the economy we must understand the impact of inflation on our savings. Yes all that cash sitting in the bank invested at near to zero rates is being plagued by the rising inflation. Inflation acts as a cancer for our savings. In such times it is very important to find investments which on one hand neutralize the impact of inflation and on the other hand provide a risk free parking for our hard earned money. Prior to the real estate crises people use to invest their money in REITs (Real estate investment trusts) or direct investment in homes but that option is no longer available. At the moment in my opinion the best option is to park our savings into gold. Some people might think it’s too late to purchase gold since it has already increased more than 300% in the past couple of years. But according to my calculations it still has enormous potential. The main reason for this increase in gold’s value is because of the declining confidence in USD. Countries like China have trillions of dollars on their books, USD is currently a devaluating asset and with the US banking disaster and a very high and ever increasing current account deficit the future of USD does not look very promising. Off course China will not let its trillion dollar reserve turn in to blanks so it is purchasing gold from the international market in huge volumes.
Gold can be purchased by either opening a brokerage account with your local commodity broker or one can simply purchase it from the market.