Saturday, March 31, 2018

Gold Investment During Tumultuous Times

Gold is proving its evergreen commodity status. Currently priced at $1,358 per ounce, it’s defying expectations by maintaining its price, showing consistency not found since July 2016. What’s more, gold is predicted to keep rising by Goldman Sachs, who have this week asserted that it will continue to outperform other commodities amidst fears over a market correction.

The shifting political landscape and rocky future outlook are creating problems for many markets, making securing a good investment a difficult proposition. Bucking the trend, gold is arguably profiting from global changes to its own benefit.

Trade wars and improving outlooks
The past month has been dominated by headlines concerning a trade war as hostilities ramp up between the USA and China over perceived transgressions. Typically, this would create uncertainty between the markets. Take the unexpected Brexit vote over in the UK; the result wiped $2tn off stock markets in panic. However, if you check the gold price at Money Metals Exchange it becomes apparent that gold continues to grow, never dropping under $1,000 since before 2010 and growing $5 per ounce on the back of the announcement of Trump’s China tariff. The reasons for this are varied, but Bloomberg have detailed how gold investors have out-thought hedge funds, demonstrating confidence in the commodity - despite political uncertainty.

The power of inflation
For the first time since late 2008, inflation is set to rise far above the 2% guideline in America. Reuters have explained the reasons behind rising inflation, and they shed a little light on the bullish price of gold bullion. With inflation rising, the price of the US dollar drops. In turn, gold - which is closely tied to the US dollar - becomes far more affordable, as do other related luxury markets such as tourism. If the dollar continues to fall amid inflation, gold will continue to rise in the absence of an interest rate lift.

The growth of related markets
Inflation is being driven up by increased employment, and generally speaking there is more money in the US right now. The result is growth in related markets, paired with increased global international connectivity. More people are able to purchase items more of the time, and in increased numbers. Retail consultants McKinsey have predicted a global growth in the jewellery market to $250bn by 2020, up from current sales of $148bn. This results in increased demand for gold, and particularly good quality gold as people have more income to spend. 

Gold is one of the oldest traded metals in the world, creating the foundations of many currency systems globally. Still today it creates a wonderful part of the portfolio of many canny investors.
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