Gold Prices: Why They Increase
The price of gold changes according to the growth in demand for jewellery. More people are investing money in gold jewellery, perhaps due to increasing affluence. Gold is considered a solid asset. With this increase, prices increase too.
Another factor that determines the price is the US dollar. With the weakening of the US dollar, people are afraid that they will lose value in money. Hence, they invest in gold. With more investors seeking a slice of the pie, prices increase even more.
In addition, the reason why prices of gold is so high is due to the rise of oil prices. There is a rise in inflationary pressures around the world. With increasing inflation, the value of money will be eroded. Hence, people will move their money into stable assets like gold. Any terrorist attacks may result in weak economy and low property prices, but the price of gold will not be affected.
Prices of gold are fixed on the London market. This takes place twice daily, and people around the globe follow the prices.
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1) Buy GOLD to form part of the investment portfolio and limit to 10%;
2) Long-term, GOLD may not get as good returns as equities.