The US has endured the longest and deepest economic rebound ever since the 1930s. With the US manufacturing base shipped to overseas, the fewer jobs created are in the service industry and government sector. Therefore, the fundamental rise in the price of gold has been attributed to the global recession as risk averse investors are devising new ways and safer products to hold their wealth. The dollar keeps weakening and international investors prefer to put their faith in the precious yellow metal, raising its value. You can start buying gold ira through gold ira companies.
2. Speculation and Anxiety
Every day, the market does a hard job trying to balance greed and fear. However, at the end of the day, fear always predominates. Investors are quick to abandon any investment with the slightest perceived risk. For instance, the sovereign-debt crisis that began with Greece and Iceland threatens to spread across the globe. As a result, fearful investors are taking precaution and moving assets from weakening currencies such as euro into gold. In addition, the Dow’s 1000-point dive in May 2010 demonstrated to investors how extremely vulnerable paper assets are. Although the stock market recovered from the 2008/09 dark hole, some stock market analysts think that it is overbought and about to come in terms with the painful reality.
3. Market Demand
The US Federal Reserve has maintained virtually zero interest rates, without a hint of a hike any time soon, subsequently lowering the opportunity cost of purchasing gold. Investors’ reaction has been astonishing; with eagerness, leaving the US Mint with no option but to ration popular bullion commodities just to meet the overwhelming demand. If anything, gold’s value is not derived from its industrial applications, but from the fact that it is universally accepted as a stable and safe store of value. Therefore, as long as the public continue to lose trust for debased paper currencies, the demand for gold will continue to rise exponentially.
4. The Dollar Fluctuation
The worldwide flee from risky assets and the unwinding bets placed with borrowed dollars have benefited the dollar. It has come as a surprise to many who believed that increased government spending as well as a subsiding US economy would maim the dollar. However, it turns out the dollar’s health remains largely dependent on foreigner’s thirst for US assets, which will reduce with faltering of the economy and the government’s continuous injection of additional liquidity. The weakening of the dollar, policy reflation, and plentiful liquidity will be major topics for debate in the future.
The cure of deflation as opposed to deflation itself greatly benefits gold. With time, the market will get over deflation issues and focus on inflation – gold’s real inflection point. The Federal Reserve, the Swiss National Bank, the Bank of England, and the European central banks have all radically increased their balance sheets. Voluminous money supply growth will have so much money splashing through the system, generating a potentially terrible inflation. Historical factors such as low US interest rates, dollar weakness, and the Federal Reserve’s long-term inflationary pressures tossing trillions of dollars at the US economy provide an ample environment for tangible assets such as gold. More reasons to invest in gold.