Are you someone who is dedicated to tracking the current price of gold and then buying when there is a decline or dip? This is now the one and only way to get any sort of “bargain” price on gold for the portfolio. The current price of gold is something that might make the novice investor a bit skeptical, but it is important to stop and consider how the price reached its record levels and why there is no sign of it stopping its epic climb.
Firstly, the current price of gold is the result of more than just one financial or economic problem. In fact, the price is a good reflection of the general “ill health” of the world’s markets in general. This is illustrated by the fact that so many investors are rushing to acquire gold, which is the classic sign of the need for a safe haven asset.
A safe haven is something that is not risky and which will hold capital at a stable level throughout a period of trouble or inflation. For example, in 2007 the markets began showing signs of trouble due to the problems with the mortgage industry. At the exact same time, there was a market increase in gold pricing and purchasing. This is because investors with larger holdings in mortgage-related entities knew that they had to “get out” of that market and find a secure place to put their money until things stabilized. They opted for gold and have remained with it since.
The mortgage crisis is not the only one to impact the current price of gold, however, and in 2010 alone it is known that gold ownership increased by 20% over the previous year.
In addition to the long list of world market issues and global economic troubles, there are pressures from other areas that cause gold prices to climb as well. For example, in January and February of 2011 there was an outbreak of political upheaval across the Middle East. This instantly drove investors to reconsider their holdings. This is because the nations in turmoil were among the major oil producing countries, and even had control over a great deal of shipping too. This meant that even more economic chaos was possible, and this led people to seek additional safe haven options.
Industrial demands also account for effects on gold prices, and the strong demands in early 2011 drove the price for gold up by two percent in a single month!