Gold has been a very interesting asset to watch as of late, and for good reason. While the value of the commodity has seen its share of ups and downs throughout the year, all the movement has led to massive gains. As a result, we've seen quite a few experts predicting that the price of the precious metal can get to $1,400 per ounce or even higher. However, are these basic assumptions or is this more of an imminent reality? Today, we'll talk about what causes movement in the price of gold, what we're seeing around the world, and whether or not gold is likely to break the $1,400 per ounce mark.
What Causes Movement In The Price Of Gold
Gold is a commodity, and as a commodity, it is heavily dependent on the law of supply and demand. This law dictates that when supplies are up and demand is down, we can expect to see declines in the price of the precious metal. Adversely, if demand is up and supplies are down, we can expect to see gains. However, gold is also a safe haven investment. So, there's a bit more complexity in determining future price movements surrounding the precious metal.
As a safe haven investment, investors tend to look to gold as a way to keep their financial assets safe during stressful economic and market times. So, when economic conditions or market conditions are concerning, gold tends to spike in value as safe haven demand increases. Adversely, if economic and market conditions are positive, gold tends to see declines as safe haven demand decreases.
There's A Strong Case For Gold Breaking The $1,400 Per Ounce Level
While it may seem like a far off concept, the truth is that the price of gold can very realistically break the $1,400 mark. In fact, if things keep going the way they're going, it becomes more of an imminent reality than a possibility.
At the end of the day, safe haven demand for gold is on the rise, and for good reason. Around the world, economic conditions are concerning. Tough economic conditions throughout the first half of 2016, sent markets on a turbulent ride while gold continued to edge upward in value.
Now, central banks are scurrying to put economic stimulus in place that will save their struggling economies. In fact, the Bank of England just unleashed a stimulus package that includes lower interest rates, bond buying, and more spending of new money. However, these stimulus plans are actually a double edged sword.
Investors and consumers are starting to realize that any time there is a financial pickle, the central banks react by printing more money. This devalues currencies in a big way. Therefore, even though the new money may lift economies in the short term, it creates long term economic struggles. Essentially, central banks are putting band aids on festering wounds and hoping for the best. As these actions continue, the argument for further gains in gold becomes stronger.
The Bottom Line
The bottom line is that around the world, more and more investors and consumers are noticing that the fiat currency world isn't working. With nothing to back currencies, there's nothing to stop reckless actions of central banks. At the moment, we are facing an economic reality that was painted together by central bank actions, money printing, and the inability of central banks around the world to admit that the system is not working. As a result, we're likely to see a continuation of the issues at hand, leading to further distrust of currency, further turbulence in financial markets, and ultimately further gains in gold.