Why Gold Keeps On Rising

Gold plays an additional role, which is to serve as a store of purchasing power. It can also be used in productive processes but the bulk of gold demand comes from its use as a reserve.

The fact that markets are in different time zones, enables transactions for 24 hours. The main currencies used in transactions are the dollar and euro. At a time when sterling was the dominant currency, but not now.

Gold is known as what’s called a neutral as it is not tied to any country in particular so the price of gold is not under the influence of government. Gold is an important mover of the forex market.

Given its use as a reserve, the price of gold is closely related to the behavior of other investment alternatives, such as currencies, bonds and equities. The gold price tends to rise when in the midst of monetary instability and lower capital markets. Events such as wars and natural disasters also affect the price.

The price of gold has been rising due to the weak dollar and the unstable situation in the equity markets. However, its real price, adjusted for inflation, is much lower today than it was in the early 1980s.

The trend of gold has been up for the last six years has gold has risen from $330 to over $1,150 an ounce as recently as December 2009.

In the currency market, some investors also buy and sell gold for speculative reasons trying to make profits with small price fluctuations. However, the price of gold is very difficult to predict, since their use is mostly as a reserve of purchasing power, and therefore is subject to many monetary and psychological factors.

Investing in the short term to earn more than other types of investments can be very risky. As always do your research and be prepared to also manage your risk.

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