From the beginning this world, if there is one commodity that has always shined then it would be only gold. Not just it is the most powerful commodity in stock business, also it is one of the most precious elements ever saw. The reason behind gold’s popularity is that it is being used as currency, commodity, and a source of investment. It is this rapidly growing popularity that gold’s price is achieving new heights almost every month. Today, some investor tries to speculate that how far gold price can be possible go. Although no one can make a perfect guess, but lot of them agree that it could possibly go on like this.
In the first part of this article, let’s take a deep look on all the factors that are influencing the gold prices to rise.
Reserves of the central banks:
Gold is indeed a must need for the central bank to issue currency notes. They keep a percentage of gold as a reserve when they are ready to issue new currency notes. Now it has happened for the first time in the last decade that the focus on the central banks is to buy more gold than what they will sell. When this scenario is happening worldwide, it will definitely increase the demand of the gold which will result in the higher prices.
The value of US Dollar:
Historically, the relationship between US dollar and gold has always been on the inverse side. This means that if the price of dollar increases, the gold prices fall down and vice versa. This habit is due to the preferences of the investors. When the price of a dollar is high, the investors trade in the US dollar. However, when the price is lower, investors trade in gold to keep them on the safer side.
One of the main reasons of why gold prices have increased is its increased demand due to jewelry and industrial usage. According to an estimate, the jewelry makes up a total of 80% of the mined gold. As the income of emerging market is increasing, the gold’s price and demand have increased.
Throughout the world, the political is becoming un-pleasant. The main reason behind this turmoil is the increase of oil prices, violence events, and economic stability. All this has left a negative on the investors worldwide, and investors are very much concerned about their investments. In such cases, the price of gold will increase due to increase in interest. The increase in interest is done to make gold a secure investment.
Will there be a further increase in gold price?
In the end, it is indeed the most important question for the investors. Gold prices are continuously increasing because investors are hedging it during the inflation. Although some investors are really concerned that this price hike might stop soon but in reality, this doesn’t seem to be true. Until the demand supply gap of gold remains wide, the prices are expected to grow further.