Reasons Why Gold Prices Will Rise

Gold Price Forecasts

Mr. Murenbeeld stated that in a global shift, "gold has become an investment, an asset class [according to Bloomberg]." He believes that in the future, it will be amassed. On Tuesday, exchange-traded fund holdings backed by this metal hit a record 2,410.2 metric tons, according to Bloomberg data. This year on the New York Comex, futures have already increased 6.5 percent, while the 24-commodity S&P GSCI Spot Index increased 9.5 percent and the MSCI All-Country World Index of equities appreciated 11 percent.

To spur growth in the U.S. economy, the Federal Reserve has kept interest rates near zero percent and engaged in two rounds of quantitative easing. This has increased demand for the precious metal as a hedge against a declining dollar and inflation. Greece recently announced the largest restructuring of sovereign debt in history and Ireland and Portugal have also sought bailouts. Gold offers "the ultimate downside protection" during situations like this, said Rachel Benepe, co-manager of the First Eagle Gold Fund [according to Bloomberg].Article Source: http://EzineArticles.com/6948861

Reasons Why Gold Prices Will Rise

Increasing Deficit in the Balance of Trade

The increase of deficit in the balance of trade to countries such as the United States is one of the reasons why gold prices are getting higher and higher. The deficit is caused by the increase of the proportion of the imports to private consumption (this also includes the volume of exports). The deficit in the balance of trade is a result of the rise in the imports' ratio percentage by 1.4% and the rise in the percentage of exports by 0.4%. This deficit in the balance of trade is one of the causes of the rising price of gold.

Low Output of Gold

Another reason for the rising value of gold is the low output of gold from important gold-producing countries such as the Philippines, China, Australia, Canada, United States, and South Africa. The low output of gold from these countries is causing an increase in the demand of gold, resulting in the increase of gold prices in other countries.

Economic and Political Factors

According to experts, economic and political events all around the world also have an effect gold. In the Asian markets, gold rose by about 25% from 2010 to 2011 because of the fluctuations in the global oil market and the financial markets. The fluctuations affected the exchange rates of the currencies in many countries, prompting some of them to store large amounts of raw gold. This action is done in anticipation to political risks and security that is caused by the fluctuating global economy.

Increase in Demand of Gold

Lastly, the increase in gold prices is also caused by the increasing demand of gold. Today, the global demand for gold is steadily increasing while the supply of gold from gold-producing countries is decreasing. There is now a shortage in the supply of gold and this is causing the price of gold to rise. The increase in demand has caused the current price of gold to rise by 50% of its previous price a few years ago. According to experts, the high price and demand of crude oil is also affecting gold. The increase in the revenues of oil-producing countries is affecting the global market, which causing an increase in the price of gold in other countries.

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Soaring Gold Price Makes It Uncommon for The Common Man

Gold has witnessed to a nonstop historic rally. The price of gold hit a 25-year high touching USD 637.30 an ounce this week. The reason mostly is the huge amount of investment being made into precious metals. According to PTI, standard gold (99.5 purity) shot up by Rs 50 per 10 gram higher at Rs 9,345 from Rs 9295 of yesterday (27/04/2006) while pure gold (99.9 purity) also jumped up by similar margin and closed at Rs 9390 per 10 grams against the previous day close of Rs 9340. At the same time, the price of gold in the international market rose by USD 3.68 per ounce and shot up at $637.30 as investors took gold as the safe haven during the time of rampant inflation and global disturbances of many a kinds- political and apolitical. Perhaps, now gold has been golden. Gold is chosen as the best alternative option to invest into by the investors who are worried and quite apprehensive over current market situations. Mostly the fear of raging Inflation, then international conflicts like Iran nuclear row, Venezuela’s challenges to the US, Nigerian violence etc. are some major factors that raise insecurity among the investors. 

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