The price of gold recently hit a five year low and suffered its longest losing streak in 20 years, with its value predicted by many to drop below $1000 per ounce by the end of 2015. The past two years gold has posted losses and if it doesn’t bounce back soon it could be the first time since 1996 it will have had three years of losses in a row.
Despite the falling price many experts don’t think it will pick up quickly, even though gold is a historically safe investment, especially in the event of a financial market crash. A minor resurgence could be on the cards but unlike silver whereby industry relies on it, gold is more for investors. A few factors could see its price improve.
Weakened US Dollar
A strong US dollar which has gained around 21% compared with many other major currencies in the last year, had more of a negative effect on the price of gold. As gold is priced in dollars this means when it rises investors have less buying power which decreases demand.
If the dollar weakens investors will have more buying power and investing in gold becomes a much safer option. The real price of precious metals also gets re-evaluated when currency movements happen and if investors don’t feel the value of gold and the market aren’t increasing at the same rate then many are likely to sell before they significantly decrease in value.
Chinese Interest
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China’s gold reserves have been on the up since 2009 with recently released data showing a 60% increase in the past six years. The country had previously been extremely secretive about its huge stash and this increase now means it now ranks as the fifth highest nation for gold holdings.
However, this boost was still only about half as much of an increase that many experts had expected. Chinese acquisitions of gold were supposed to be one of the major factors underpinning the gold market in the past few years and because they haven’t reached the levels expected this has seen the value drop. If the nation, or any other big country for that matter, decides to rapidly improve their gold reserves then the price is sure to increase too.
More Fear
The Greek debt crisis and other global news stories such as the ongoing tension between Iran and the USA over nuclear weapons usually works in the price of gold’s favour. Much like many forex traders use the Japanese Yen as a safe investment during times of turmoil, many investors often turn to buying gold assets when worried about an economic disaster.
Since Greece seems to have (temporarily at least) sorted out another bailout package and an historic deal between Iran and the USA has been reached, fewer investors have been scared into making safe investments in gold. Another Greek financial meltdown could well be on the way and may tempt many to start pumping their finances back into gold. As a physical asset it is far more secure than investing in the currency concept.
The price of gold recently hit a five year low and suffered its longest losing streak in 20 years, with its value predicted by many to drop below $1000 per ounce by the end of 2015. The past two years gold has posted losses and if it doesn’t bounce back soon it could be the first time since 1996 it will have had three years of losses in a row.
Despite the falling price many experts don’t think it will pick up quickly, even though gold is a historically safe investment, especially in the event of a financial market crash. A minor resurgence could be on the cards but unlike silver whereby industry relies on it, gold is more for investors. A few factors could see its price improve.
Weakened US Dollar
A strong US dollar which has gained around 21% compared with many other major currencies in the last year, had more of a negative effect on the price of gold. As gold is priced in dollars this means when it rises investors have less buying power which decreases demand.
If the dollar weakens investors will have more buying power and investing in gold becomes a much safer option. The real price of precious metals also gets re-evaluated when currency movements happen and if investors don’t feel the value of gold and the market aren’t increasing at the same rate then many are likely to sell before they significantly decrease in value.
Chinese Interest
China’s gold reserves have been on the up since 2009 with recently released data showing a 60% increase in the past six years. The country had previously been extremely secretive about its huge stash and this increase now means it now ranks as the fifth highest nation for gold holdings.
However, this boost was still only about half as much of an increase that many experts had expected. Chinese acquisitions of gold were supposed to be one of the major factors underpinning the gold market in the past few years and because they haven’t reached the levels expected this has seen the value drop. If the nation, or any other big country for that matter, decides to rapidly improve their gold reserves then the price is sure to increase too.
More Fear
The Greek debt crisis and other global news stories such as the ongoing tension between Iran and the USA over nuclear weapons usually works in the price of gold’s favour. Much like many forex traders use the Japanese Yen as a safe investment during times of turmoil, many investors often turn to buying gold assets when worried about an economic disaster.
Since Greece seems to have (temporarily at least) sorted out another bailout package and an historic deal between Iran and the USA has been reached, fewer investors have been scared into making safe investments in gold. Another Greek financial meltdown could well be on the way and may tempt many to start pumping their finances back into gold. As a physical asset it is far more secure than investing in the currency concept.
Article by Jonny Pean