Reasons why GOLD is going up; Gold rally continues

GoldSo much is happening in the financial markets around the world that investors have started doubting the safety of the reserve currency of the world. US is adamant to print  dollars every time economy starts faulting. Now those magical bluff QE3 can be heard in the financial corridors. European Union on the other hand is trapped between the PIIGS. One after another countries are getting ready to default and ECB even more ready to switch on its printing press. After all these events only asset which has continued to be faithful to investors is GOLD. The yellow metal has kept its stature of safest heaven of all time in history. Gold continues to rise as the turmoil in the financial world keeps on playing with investors.

In order to keep its debt cheaper, most of the western countries are trying to keep their currencies as low as possible. Euro is falling apart and US is trying to hold it back. This is done by opening swap desks for European banks or by announcing those magical bluff QE3. Investors want to know that assets they own are secure. Well, most of the assets are dollar denominated which means they are backed by the dollar which is the reserve currency of the world, but what about dollars’ backing? Dollar is backed by piece of papers which can be printed anytime and has no intrinsic value. Doesn’t that mean Gold is the natural safe heaven for the jittery investors.

Gold chart

There preciously 3 reasons why GOLD prices are moving up:

1. Gold is a dollar denominated asset which means if the value of Dollar moves down, the Gold automatically becomes more precious and moves up.

2. European Debt crisis and US slowdown keeps on shaking the system and sending Gold higher.

3. Demand for Gold in developing nations China and India continues to grow as if there was no downturn at all.

Hitesh Anand

I am a post graduate from Newcastle University, UK. I like studying and analyzing economic data and financial health of world.

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