old Prices Edge Higher After Trump Rejects the US Stimulus Package – Gold is often times viewed as a good hedge against inflation. It is said that it serves as a store of wealth and is important for inflation d
ue to its ability to become malleable when in a crisis, thus helping to stabilize the economy. However, recent gold price spikes and dips have caused many investors to question whether or not the metal is actually priced into the real economy. It’s critical to understand how exactly this affects the gold price, and if indeed it is changing the market outlook.
One reason that makes the gold price rise is due to the stimulus package; as gold becomes more expensive due to the economic recovery, investors flock to the precious metal to purchase. Since there is significant faith in the stimulus plan and the economic recovery, this has been a major force behind the gold price increases. This confidence could be translated into real growth for gold as well, and this is what makes investors all across the world consider investing in this tangible asset as a hedge against inflation.
Economic instability is nothing new to anyone, and has been a consistent feature of human societies since the dawn of civilization. Trends tend to repeat themselves, and often economic indicators are unreliable due to their inherent nature. Gold prices are no exception. The instability in world markets has been felt by those who have bought during the past few years. Gold is highly valuable because of its status as a store of wealth, and it also tends to have high social acceptance and is therefore used as a standard for measuring wealth and authority in society.
How do we determine if a particular economic indicator is reliable? For most of us it’s either a safe haven like the U.S. dollar, or an equally strong currency like the British pound. For the time being, since we are not yet out of the recession, we are going to rely on the latter, the pound. But that doesn’t mean that the gold price is irrelevant to the health of an economy. On the contrary, it is actually quite relevant to the current economic recovery and how it may impact the future.
So what makes gold prices edge higher? There are a number of reasons why it may be so. One is the belief that we are currently in the beginning stages of global economic recovery. Investors and citizens alike are optimistic about the future, and a solid economy will be key to ensuring that progress stays on track. Gold is seen as a safe investment, as people will invest more into gold as the economy improves.
Another factor is the belief that gold will regain its previous gains as economic policies continue to be enacted by the governments of various countries. In the past, gold has rarely reaped any significant increase in prices due to governmental interventions. However, following the global crisis, the global outlook for governments and central banks was dimmed considerably. Now, the outlook is looking more positive and this has resulted in more investors turning towards investing in gold as a safe haven.
The third reason why gold prices are expected to edge higher is the prospect of economic improvement in China. China is currently the world’s largest consumer of gold and it accounts for around a quarter of global gold production. In addition to this fact, there is also the specter of deflation looming over the economy. It is hard to say whether or not China will remain a major force in the global economy. Some analysts have pointed out that there is a possibility of a “uxile” of sorts – the current economic boom in the Asian nation might just be a flash in the pan. Yet, others argue that China will continue to rise to economic stardom status, which could pave the way for other emerging economies to do so as well.
Gold prices may edge higher again as the Chinese economy begins to improve. If the Chinese government starts to liberalize the economy, there is a strong likelihood that the purchasing power of the Chinese people will increase. This could bring about a sharp reduction in the price of gold as Chinese citizens start to buy gold once again. Although gold may be priced slightly higher than its usual starting point, investors should remain bearish on the gold market for now, especially as other economies have shown that they can withstand economic downturns. Given that gold prices have been negatively affected by recent economic events, investors would be well-advised to wait until these circumstances subside before trading in gol