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Why does the price of gold keep rising?
|| Gold has climbed to a record high of more than US$1594 last Friday and by the time you read this gold could be well above the US$1,600 mark.
Why does the price of gold keep going up and how does it arrive at this market price?
The main factors influencing the price of gold are:
- The supply and demand for gold,
- The amount of gold in the central banks' reserves,
- The value of the U.S. dollar and
- The desire to hold gold as a hedge against inflation and currency devaluation.
Demand in gold has increased substantially in jewellery and industrial demand in 2011, according to the World Gold Council. Central banks around the world like Russia and China are increasing their gold reserve. Consumer demand in China, for example, for the first two months of 2011 reached 200 tonnes - a huge increase over the previous year, which took 10 months to reach 209 tonnes. India, China and the United States are the largest consumers of gold for jewellery in terms of volume.
Gold is often used as a hedge against the American dollar. As the US dollar has been declining for the last few years gold price climbs steadily to the record last Friday.
Gold can also be used as a hedge against currency devaluation, inflation. In addition, gold is viewed as providing protection from political instability, as evidenced by the recent unrest in the Middle East and North Africa, which helps in increasing the gold price.
As to how high the price of gold will reach? We wish we knew the answer. Meanwhile, just enjoy your gold, one of world's most precious metals.