It comes as no surprise to any investor right now that the world situation contains a lot of uncertainty. This feeling is driving the price of gold higher almost every day as investors react to market news. When the veil is lifted from all the daily news snippets, however, two factors are really driving the price of gold.
The first factor is the weaker U.S. dollar. There is a direct correlation between the dollar and the price of gold. As the dollar gets weaker, gold becomes a stronger commodity. No one is certain when the Fed will decide to raise interest rates, although it may be very soon. The hard fought United States election cycle is leaving investors feeling particularly unsettled. Therefore, gold prices may very well continue to rise through at least November with many experts suggesting that the price of gold will top at over $1,400 per ounce before the end of the year.
The second factor that is driving gold prices higher on an almost daily basis is interest rates. While rates are extremely low in the United States, they are even lower in other parts of the world where people are having to pay money just to keep cash in the bank. While this was unthinkable before 2008, about 500 million people living in 25 percent of the world’s economies are currently living with interest rates in the red. This includes people living in Europe, Japan, Sweden, Switzerland and Denmark. As people are not rewarded for keeping cash on hand, they are looking for another investment that does not carry very much risk.
Central banks and governments are buying more gold than ever before. So far during 2016, they have purchased more than 350 tons of gold. The largest purchaser of gold is the United Stats government that already has over 8,134 tons of gold in storage.
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