As we have witnessed that gold prices in USA are continuously fluctuating since a year back. There are several reasons behind this rise and fall. In the month of June, gold price witnessed a record three year low. The rationale behind the steep decline in gold prices is considered as the after effects of the global crises 2008. After the crises, the affected countries including USA, UK, Russia, Japan, and some of the Asian countries got their reserves down on noticeable manner. In the month of June’ 13, central bank of USA (the Fed) demanded for high amount of gold, approximately equal to 12 percent of the global demand. It was 48 years’ record high demand by the fed.
Here we have a list of possible rationales which could cause an increase in gold prices in USA :
World economy is struggling to regain its position through several collective efforts by several groups of countries. Yet it is not in a significant position. Rebound in the economy will line up the investment in gold. The declining world economy caused a decline in investment in gold due to investors uncertainty of losing the money. It is the essence of all rationales that economic health is directly related to the industry and investment mobilization. Furthermore, Russia tried hard to rebound gold prices in the international market by introducing investor friendly gold bullion policies.
After the investors will start trusting the gold investment again, the gold price will automatically be mobilized. Investors have turned their flow to the other alternatives due to overall steep uncertainty. After the global crisis of 2008, it did not seem to have any difference rather the gold price immediately started to go up. But this sharp increase was nothing more than a bubble. Now the bubble has broken and real after effects are quite visible.
It is an admitted fact that dollar value has the inverse relationship with the gold prices in USA. Nowadays Fed has intended to strengthen the dollar value in the global market by increasing the gold reserve holding. The policy seems to be pretty much successful as per intentions. Any time in the future, gold prices in USA will bounce back when fed will introduce any policy to depreciate the dollar value.
Stock Market Efficiency
There is a little direct relationship with daily quotes and the gold prices in USA. But there is a causal relationship which comes in the action occasionally due to macroeconomic factors in the action such as inflation, reflation, industrial growth, technological advancements and so on.
It is anticipated that gold prices will follow such fluctuations up to an infinite period of time due to economic factors. A bounce back will only be expected when the fed will put a change in their policies. However, a new phenomenon creating hype in international market known as, “China is taking over the GOLD” can make a difference if it will remain for long time in action.by