Why Are Gold Prices Rising? What Exactly Is Fueling Its Rise? Get The Big Picture Here Now!

Oct. 12, 2011 - PRLog -- During 1971 President Richard Nixon ended US dollar convertibility to gold, bringing to an finish the central role of gold in globe currency systems. 3 years later Congress legalized the ownership of gold by US citizens. Freed from the government-mandated price of $35 per ounce, the dollar and gold floated. In 1979 and 1980, investors’ lack of confidence in the government’s capability to restrict the expansion of the cash supply resulted in panic purchasing of precious metals as a hedge against inflation. Gold prices soared, and in January 1980 the gold price hit a record of $850 per ounce. Throughout the four-year period from 1976 to 1980, the price of gold had risen by more than 750%. Go to http://silver-dollar-values.com for profitable investing ideas.

In the early 1980s the US Federal Reserve raised interest rates to restrict cash supply growth. This policy achieved its purpose and by 1982 interest rates had been declining and also the fear of inflation had subsided. Investment capital responded by moving into monetary assets from commodities which includes gold, and also the marketplace soared. Following the historic highs of January 1980, the price of gold meandered in the $300-$400 range till hitting a low of $256 in February 2001. Then the bull marketplace for gold returned, and by November 2009 the price had pushed as much as $1,140 - a rise of 445%. To some investors, this suggests that history is repeating itself and gold is heading beyond $2,000 per ounce. To return to the 1980 high, when adjusted for inflation, the price would need to be over $2,000 now.

The price of gold is set by the Gold Fixing, that is also recognized as the Gold Fix or London Gold Fixing. Twice each day by telephone, at ten:30 GMT and 15:00 GMT, 5 members of the London Gold Pool meet to settle contracts in between members of the London bullion marketplace. These settlements brokered by the Gold Fixing are widely recognized as the benchmark utilized to price gold and gold goods all through the globe. Go to http://silver-dollar-values.net for profitable investing ideas.

Let’s examine some of the elements that influence the price of gold. There's an agency that tracks of all of the gold in the globe. Gold Fields Mineral Services Ltd (GFMS) is an independent, London-based consultancy and analysis business, devoted to the study of the international gold and silver markets. GFMS publishes the annual Gold Survey, which functions comprehensive analysis and statistics on gold supply and demand for over sixty countries. GFMS estimates that above-ground gold stocks represent a total volume of roughly 160,000 tonnes, of which over 60% has been mined since 1950. GFMS estimates that all of the gold ever mined would form a cube measuring 20 yards (19 meters) on every side.

The production of new gold doesn't usually maintain pace with inflation. The aboveground gold stock increases at a fairly constant rate of about 1.7% per year. Throughout the last 50 years the largest annual increase was 2.1% and also the smallest increase was 1.4%. This really is less than the long-term historic rate of inflation, that is 4%. Go to http://www.silver-dollar-values.com for profitable investing ideas.

In early November, using the objective to support the United States’ recovery from recession, the US Federal Reserve decided to maintain the huge stimulus measures and hold down US interest rates for “an extended period.” Using the Federal Reserve keeping rates low, a record US spending budget deficit continuing to rise, and central banks all over the globe diversifying away from the dollar, gold might continue to be a very appealing option. Following all, the cost of borrowing cash to invest in gold is next to absolutely nothing.

On the global markets there's a persistent lack of confidence in paper-based currencies. The weakening of the U.S. dollar has had a broad impact that reduces confidence in other currencies. And with central banks and government policymakers nonetheless entangled in their unprecedented fiscal and monetary interventions, this could continue for a lot longer.

The present strength of gold might be a reflection not of a particular response to the worth of the US dollar, but rather the expression of the exact same underlying malaise using the lingering effects of the global monetary crisis.

In current years the decline in mine supply has been supplemented by a number of elements which includes sustained central bank gold sales. In the 1990s, central bankers had been acting as a group to decrease their gold holdings, confident that the fiat currencies had been a better store of worth. Central bank reserve sales, which throughout the past decade have played a important role in keeping gold prices in check, have slowed lately. Now gold’s attractions are re-emerging and bankers look set to be net buyers, which ought to help tighten the marketplace.

When it comes to addition, scrap sales offset mining declines. In the first quarter, scrap sales rose sharply as gold re-visited its all-time high. Industrial demand for gold is influenced by fabrication needs, which have dropped sharply since 1997. The global economic downturn, coupled with greater prices, further decreased the demand for jewelry, and supply-demand modifications add small in terms of explaining bullion’s rise.

Ten-year U.S. treasury yields have rebounded from their end-of-2008 lows in between 2% and 3.3%, but this doesn't necessarily represent widespread fear of inflation. There's small evidence that gold purchasing will be the result of inflation concerns.

The 2008 surge in crude oil prices to US$147 per barrel suggests that a comparable speculative bubble is forming in gold. Nevertheless, one apparent distinction in between then and now is the fact that when oil peaked, the forward marketplace was anticipating a decline in prices. The gold marketplace anticipates a rise, and forecasts a worth of US$1,250 per ounce for June 2014. While ETFs had been cited as a culprit for the rise in oil and are also playing a role in the gold marketplace, their impact might be limited in the gold marketplace.

Early on in 2009 ETFs might have been active buyers, but their activity has leveled off since. There has been a sharp increase in long forward positions in gold in the Commodity Futures Trading Commission (CFTC) and net longs have reached a record.

Regardless of all of the attention being paid to sales of gold by central banks and also the reality that globe gold holdings have skilled a broad decline, holdings in industrialized economies are on the rise as a share of total foreign reserves. And this trend was renewed in the first quarter.

China is growing as an international economic force and its reported gold holdings aren't necessarily dependable. This really is especially substantial now that Chinese authorities can make their purchases on the domestic marketplace. The People’s Bank of China (BOC) holds about 1,054 metric tons of gold, that is about two percent of its $2.3 trillion in foreign currency reserves.

In September 2009 the International Monetary Fund (IMF) announced that it would sell 403.3 metric tons of gold to strengthen its finances and increase its capability to create loans to creating countries. In November IMF revealed that from Oct. 19 to Oct. 30 it sold 200 metric tons of gold to the Reserve Bank of India (RBI). The RBI paid $6.7 billion for the equivalent of about 8% of the world’s annual mine production. As a percentage of foreign reserves, India’s gold holdings are now greater than even China’s. Many analysts think India’s buy will spur other countries and investors to ramp up their gold purchases. Indeed, with 203.3 metric tons nonetheless on sale in the IMF, China might turn out to be the next large purchaser. Today is a great time to buy gold. At the time of this composing, gold was up $16.30, or .98% at $1,680.50 per troy ounce.

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