Investing your hard earned money is not something you should do without research. Understand the price of gold is very important before you consider investing or rolling over your 401k into gold ira.
Gold is the most popular precious metal on earth. This metal is characterized by attractive, bright yellow color and luster that never tarnish either in water or air. Owing to the fact that it is the most precious metal ever known of businessmen normally buy it in order to diversify their investment risks.
It is also important to note that there is a gold market that is subjected to speculations just as other markets for instance currency market and so on. Gold price has shown a great correlation with oil price for quite a long period of time now. When the price of crude oil fluctuates the same does happen with that of gold. Economists and financial experts believe that this could actually be the main reason as to why this precious metal is normally sold off during periods of economic slump.
Factors Affecting Gold Price
The price of gold can be affected by numerous factors just like other commodities, consider the following points;
1)Demand and Supply
The price of gold can be greatly determined by its demand and supply. When it’s scarce in the market then its demand tends to rise causing the price to shoot upwards. The price of this precious metal has continuously been on the rise owing to the fact that it is scarce and very hard to obtain.
2) The Strength of Currency
When major currencies become weak investors from all around the world always begin trading their monies for gold so as to maintain their investment security. This can lead to a high demand for this metal causing its price to sky rocket. On the other hand, when currencies strengthen the demand for this commodity normally goes down because investors do the exact opposite.
One of the key factors affecting the price of gold is the nature of global economy. When the global economy is at its lowest point with most business bringing back low returns investors opt for gold. This is mainly because gold price has been known to remain stable even during the tough economic times. When more buyers opt for a specific commodity the price of that commodity shoots upwards.
4) Central Banks and Mining Corporations
Central banks and mining companies normally retain huge reserves of gold. They are known to trade in this valuable commodity depending on the trend of their currency and the general global economic situation. The transactions of gold by these entities may lead to a drastic shift in gold price.