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Source: ChilliBreeze  
What's driving the gold prices up?
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You’ve all grown up with the phrase ‘Gold Standard’; you’ve been taught that gold is the perfect investment. But where is gold headed now? Is it really worth stocking up on? Read on to find out.
The yellow metal has fascinated mankind since it was discovered. Gold does not tarnish. You can make lovely jewelry out of it and can store it for decades without it ever going out of fashion. Gold has retained its purchasing power for centuries and doesn’t depreciate either! But what drives gold prices? You do! Demand is the one reason gold prices are rising steadily. Demand has consistently outstripped production, although there is no shortage. If you are an Indian, gold jewelry is a cultural imperative – India is the world’s greatest gold consumer!
Most governments stock bullion to back up their currency. The more they stock, the less you get to buy. In fact, in 1980, gold prices rocketed upwards from an otherwise sedate, steady climb to prices that haven’t been reached even now. This happened because your government bought up tons of gold and left none in the market. But they realized the error of their ways and released some gold.
The US dollar has an inverse relationship with gold. If the dollar strengthens, gold prices slip. If the dollar weakens, gold rises. Gold is rising still and this time it’s because of an extra-weak dollar. A 25 basis point rate cut by the Fed has accentuated the downward movement of the dollar. Gold has crashed the psychological barrier of US$ 800/ounce. High oil prices may cause inflation and prompt more investment in gold, creating more demand and higher prices.
Should you be buying gold? Yes. Short of a catastrophic mutation of your DNA, nothing will change the value of gold in your life. There may be short-lived swings either way, but invest in gold and you will always be worth your weight in the yellow stuff.
Will you buy gold even at this price? Do you think gold is a safe investment? Or do you think other metals or commodities are better?
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