Gold has started to shine recently, thanks to the unstable political scenario in Europe and nervous investors in America. It has achieved a 4-week high and seems to go beyond this mark in the coming days. The precious metal is standing tall as its popularity as a safe haven is increasing. Investors are rushing to gold, some even dumping the Euro to find solace in the golden sheen of this precious metal.
This situation has left many analysts surprised as gold was speculated to decline in 2017. Many experts were not sure about the performance of gold in the first few months of the year but gold has soared a lot better than expected. Here are three reasons for the increasing demand for the yellow metal.
Dollar Index
Last year the Dollar index experienced a hike as the DXY went to a maximum of 5.4 percent. The strengthened US dollar made the precious metal fall around 10 percent, which made the experts expect lowering gold demand in the future. But, 2017 came as a surprise when the DXY lost 3.5 percent as the political and economic situation was not stable in America. Since then, gold has gained 7 percent, giving a stellar performance against all the predictions. Now, it is expected that gold will see a further hike in demand. It is being speculated that the short positions will be squared off soon, breaking all the possible barriers to gold price hike.
Global Inflation
Inflation has hit new highs in America and we will likely see increased prices in consumer goods soon. On a global level, many developed countries are suffering through because of inflationary trends with the UK, Germany and a host of other European nations feeling the heat of reflation. The Asians are not far behind as Japan and China has reflationary trends too.
This inflationary pressure makes bonds less tempting, which eventually pulls down the interest rates. Gold has always acted as a guard against inflation. Gold is the perfect hedge against inflation, leading to a rise in demand as well as prices.
Geopolitical Crisis & Gold
Trump’s policies, Brexit and the forthcoming elections in European countries have left the world politics in jeopardy. On a historical basis, the world has invested in gold in times of confusion and trouble. It’s not sure what will be the face of world politics at the end of this year. Right wing is gaining more power worldwide and the world may not remain as liberal as we know it. This fact encourages investors to buy gold and wait for the times to get better.
Gold will be seeing a rise in its demand at least till the middle of 2017. It’s is better to go with the flow to secure your money and gold is the only solution prevalent right now.
Anthony Young
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