The Question of Investing in Gold

Precious Metals Investing
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The modern market for investing in gold is a volatile one.  Gold has been skyrocketing in price over the past decade, and many thought that there was no end in sight.  However, 2013 has brought a slowdown in the rise of the price of gold.  April 2013 especially showcased this trend.  Therefore, there was much talk about the possibility of gold finally dropping to the tune of billions in losses for investors.  However, it is vital to understand why the price of gold increases and decreases before jumping on the bandwagon for either side of the debate.  Investing in gold can be a shot in the dark, but there really is a rhyme and reason to it in the long run.

Ups and Downs

The entire reason that gold was increasing in price in the first place had to do with the poor world market.  The turbulence of the world recession caused investors to seek the traditional hedge against faltering economies that is investing in gold.  Gold has no ties to any world currency, and so its value is entirely in how valuable people see it.  With markets and currencies collapsing, gold suddenly looked very appealing.  Indeed, the European market in particular has given reasons for gold’s increase because of its completely unpredictable nature and its reliance on America’s economy.  Markets in the US and in Europe, therefore, were pushing up the price of gold.

There is a good reason, however, why gold was losing money in April 2013.  Another primary reason that gold was increasing in price was that Asian investors were investing in gold at record rates.  This caused a huge sweep of demand for the metal as the small percent of the entire gold supply that is actually on the market started to disappear.  These investors had cut off their purchasing of gold in early 2013, which then led to a fall in the price of gold.

Current Increases

Investing in gold can still be a good idea, however.  Since the low of $1200 per ounce in June 2013, gold has risen again to $1380 per ounce as of August 2013.  The reasons for this increase in price are fairly standard.  In July of 2013, the Federal Reserve announced a tapering of its purchasing of MBS assets that would begin at an unspecified date.  This, then, was a clear sign that the weak market would no longer be supported by the Federal Reserve, as they had been purchasing securities from weak banks and lenders since 2009.  The result of this announcement, therefore, was an increase in interest rates, market slowdown, and a renewed rush to investing in gold as investors’ fears for the economy were renewed.  In other words, the Federal Reserve had been creating false growth, and gold again became the haven for those with concerns.

Is the Time Now?

The question of when to invest in gold is a tricky one.  Whereas the US economy could continue growing and, therefore, the European market would remain tranquil, there is also the issue of Asian investors who had to stop buying gold as a result of increased labor costs and other inflationary problems.  There are then many different issues that contribute to the price of gold, and it is difficult to ascertain exactly what will happen in the coming months.

While April 2013 was certainly a normal bump in gold’s road to higher prices, investing in gold may not be a certainty for those looking for quick yields.  Gold may go either way, and it could drop with growth of the world economy or it could rise in response to another bubble burst.  However, those looking for security either way may seriously consider investing in gold as an alternative to jumping around the stock market.  Gold is, and always will be, a tangible and secure investment to hedge against global economic problems.