Tag: gold prices

On Monday dollar declined on the back of St. Louis Fed president James Bullard’s comment that strengthened the expectation that US interest rate are likely to remain low for some time in future. James Bullard commented that the Fed should continue with its mortgage-related assets purchase program to stimulate the economy which investors took as an cue that the easy monetary policy will continue. Low US interest rates reduces returns on U.S. investments prompting investors to branch out of the dollar and hold other riskier currencies and assets with higher yields. Also gains in stock market and increase in gold and oil prices also undermined the position of dollar. With investors looking for an alternative investment to a declining dollar, gold prices increased to a record high of $1,174 an ounce. Gold is considered to be a hedge against the dollar because of its property of being a stable  [...]

As the gold prices soar to new levels the question still remains whether the gold is worth the price.  Is this the right time to invest in gold. Will gold prices continue to rise in future or is it another asset bubble. To answer these questions lets understand the dynamics of gold market. Like any other commodity gold price is determined by the forces of demand and supply. The supply of gold is more or less constant. It may increase slowly in the long run as new mines become operational and new technologies are developed to unearth gold. Hence the increase in the price of gold is entirely due to increase in demand of gold. So why is it that the demand for gold has suddenly increased? Demand for gold has increased cause other investments have lost their glitter. People are choosing to buy gold because they are looking for an investment that will not suffer when the alarm bells next  [...]