Reasons for Rise in Price of Gold

Gold prices have been making new highs consistently surprising many people, so what can be reason for such a rally in gold prices, let’s look at some of the reasons which have led to this spectacular rise in gold prices –

1. First and foremost reason of gold prices touching new high is the economic crisis or recession which has started in year 2008, though small recovery is being seen in world markets, still they are not out of woods and many people are talking about a double dip recession in the US economy which have lead many investors to buy safe heaven called gold.

2. Gold is considered as excellent hedge against the inflation, with inflation rising in many countries people tend to buy gold in order to protect themselves from inflation.

3. In past few years there has been a rise in the Gold Exchange Traded Funds. They are mutual funds who buy gold and issue units to investors in the same way as equity mutual fund does. Due to emergence of ETFs there has been a considerable increase in interest as well as trading in gold which has resulted in better price discovery of gold.

4. The weakening of the US dollar against major currencies has also lead to the rise in price of gold. Since gold is the most liquid and acceptable forms of asset all over the world, many countries are increasing the gold reserves with them and therefore buying in the fear that US dollar may collapse.

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