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The Gold Prices in USA: Present vs. the Future

 

Gold bullion vs Gold StockThe gold prices in USA are witnessing a cascading trend since the middle of February. According to the latest market estimates, the gold prices in USA economy settled to $1,247.80, after encountering an increment of $53.20 an ounce. This appears to be the highest price for the precious yellow metal since February 2015. Statistics of the gold market projects an 18% phenomenal jump in the market value of gold, amid the beginning of 2016. Considering the expectations of the investors with an increase in price, this article is written to acknowledge the reasons behind this incremental leap. This will help the investors in making long and short term gold investment decisions by studying the nature of the future trend characterized by the ebb and flow of this metal.

Let us first discover some of the main reasons that have resulted in a year high increase of gold prices in USA. Well! sensing the odds and hazards of the global economy, the outlook of US economy is under devilish nervous attacks. These nervous and indecisive attacks are fuelled by the panic stream that is spreading among the investors because of the unambiguous picturization of the world economy. Thus, jittering stock markets with unstable and weak dollar position are the main reasons for an increase in the gold prices in USA.

Here, an important question that stems from the above reason is why the global economy is at odds? The prevailing instability waves in China and wider Asia along with European economies is the main reason for these global hazards. It is, therefore, hurting the economic growth and development prospects of these economies, in specific, and the world, in general.  The recent indicators, defining the Japanese economy, showcased a contraction in the economic activity by 0.4% in the last quarter of the last year, in contrast to the anticipated figure of 0.3%. The government authorities at the central bank imposed negative interest rates for a soaring yen. Apart from these, plunging crude oil prices, and the anxiety and distress about European banks, are the main reasons of the surging gold prices in USA.

The concurrent circumstances have made investors think gold as a safe heaven. Gold is a safe heaven when the investors consider gold to be a lucrative investment option in an era when the stock markets and other currencies are unstable and prone to collapse. Thus, the financial experts are of the view that the volatility of the global economy has resulted in reincarnating gold as a viable investment choice for investors. It is important to mention that behaviour of gold, as an investment tool, is polar opposite to most of the other commodities, witnessing a downward trend. Hence, both short term and long term investors are directed towards gold when they sense a run on the stock markets. However, this gold investment does not come without its own limitation. Making such an investment will yield no interest and the investors are only able to derive monetary benefits once they sell it. Therefore, in one way or the other, it is an option that mostly suits to the risk averse investors.

Future Outlook of the Gold Prices

Having said that today investors are utmost interested in knowing the future of this increase. The topic whether gold rally will continue or it will soon hiss out is selling like hot cakes among the financial analysts and experts. There are different opinions being put forth, each with its own rationale and interpretation. In lieu of this, Bernard Dahdah, winner of the London Bullion Market Association prediction competition 2015, asserts that the gold prices will see a downward trend close to $1,000 an ounce or even lower this year. It is because the gold price hike owing to the global scenario is somewhat a bit exaggerated. According to Dahdah, the global economy will be successful in abstaining the major downward trend. This will result in US Federal Reserve revising their interest rates, showing some signs of upward movement in rates. This will allow dollar to revert back to its normal stronger position relative to the basket of other currencies. Since, gold shares a strong negative association with interest rate and dollar; there are high chances that the price of gold will gravitate downward sharply. Consequently, what requires of from the investors is to read the situation exceedingly well before making any decision about the safe heaven, Gold.

 

 

 

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About Emaad Qureshi