Price of Gold
Are you planning to invest your money on a long term basis without taking any risks? If so, look no further than gold. While there are options like investing in mutual funds and stocks, both of them are prone to risks that might erode your investment. If you carefully study the price of gold over the years, you will find that it has never failed to provide positive returns to the investor. However, since the price of this yellow metal fluctuates too, you should study these trends before investing. This allows you to purchase this precious metal when its prices are on a downswing.
What influences the price of gold?
Several factors influence the price of gold with the stock markets being the primary one. Those who follow market trends know that the value of the yellow metal is indirectly proportional to the stock market... i.e.: if the prices of stocks tumble, the price of gold increases and vice versa. As an example, an increasing number of people withdrew their money from shares and mutual funds during the global financial crisis that reared its ugly head in the first quarter of 2008. Supply and demand is another factor that determines the price of gold. People from Asian countries purchase lots of gold jewellery during the marriage season that starts from late November and lasts up to early February. Due to this, the demand for gold is more than its supply, leading to an increase in its price. This apart, uncertainty of the financial market also hikes the value of gold. When people are in doubt about the financial market, they typically prefer to invest their money in gold.
Inflation is one of the primary reasons why people invest in gold. Values of currencies do fluctuate, but the vale of the yellow metal, in terms of what an ounce of gold can purchase invariably remains stable on a long term basis. If the amount of gold produced is more than the demands of the market, it leads to a decrease in the price of gold. The value of the American Dollar also plays a major role. A strong Dollar pushes down the price of gold, whereas a weak Dollar hikes its value. According to analysts, the price of gold is increasing on a month to month basis ever since Britain decided to leave the European Union. Citizens worried about the devaluation of the British Pound compared to the American Dollar, might purchase gold in large quantities, leading to a higher demand than supply situation, resulting in inflation of gold prices. The demand for the precious yellow metal typically increases when the interest rates decrease.
Gold, per se, has no yield. However, it offers investors a better option to invest their cash when returns from cash savings and bonds are low.