Why Is Gold So High Right Now?
What are the reasons behind the high gold costs we are witnessing? Why do certain assets rise to astonishing highs when the basics remain low? In the past twelve months gold has risen to $1,007 per ounce, which is its highest point between March, 2008 and now. Gold has seen a 12% increase in the intervening months.
What are the reasons for this? You might be tempted to think its because of the basics, but its not. The World Gold Council published a report that states craving for gold accessories has declined by 22% and industrial uses for gold has declined by 21% since 2008. The only component that has remained high in the current gold arena is speculation, which has grown by 46%.
Many people are attracted to this metal because it is considered to be a good hedge against inflation. However, the Labor Department listed statistics showing that the consumer price index actually fell 2.1% over the course of the year for gold. That is not inflation that is deflation. So what is this gold hedging against?
Our money system is being corrupted due to the Federal government increasing its balance sheet. Gold seems to rise in times of deflation, which continues the corruption of our money system, and also in times of inflation, which is not a good situation either.
The US interest rates are low which is also a large factor when it comes to supporting gold. Consider the London interbank dollar rate (which is the method used by banks to charge other banks for loans) that has fallen to an unprecedented low of 0.314%, meaning it is down from 4.8% in October of last year. Unlike bonds, gold does not earn interest, which means there is an opportunity cost associated with having gold. But with the dollar worth as little as it is now that opportunity cost is rendered insignificant.
So, it seems pretty apparent that financial theory is the main cause of the increase in gold costs, and the basics really don't have anything to do with it. Gold prices are currently immense, but there's no way to know what's going to occur in the future. - 23210
What are the reasons for this? You might be tempted to think its because of the basics, but its not. The World Gold Council published a report that states craving for gold accessories has declined by 22% and industrial uses for gold has declined by 21% since 2008. The only component that has remained high in the current gold arena is speculation, which has grown by 46%.
Many people are attracted to this metal because it is considered to be a good hedge against inflation. However, the Labor Department listed statistics showing that the consumer price index actually fell 2.1% over the course of the year for gold. That is not inflation that is deflation. So what is this gold hedging against?
Our money system is being corrupted due to the Federal government increasing its balance sheet. Gold seems to rise in times of deflation, which continues the corruption of our money system, and also in times of inflation, which is not a good situation either.
The US interest rates are low which is also a large factor when it comes to supporting gold. Consider the London interbank dollar rate (which is the method used by banks to charge other banks for loans) that has fallen to an unprecedented low of 0.314%, meaning it is down from 4.8% in October of last year. Unlike bonds, gold does not earn interest, which means there is an opportunity cost associated with having gold. But with the dollar worth as little as it is now that opportunity cost is rendered insignificant.
So, it seems pretty apparent that financial theory is the main cause of the increase in gold costs, and the basics really don't have anything to do with it. Gold prices are currently immense, but there's no way to know what's going to occur in the future. - 23210
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posted by X - Men @ 7:51 AM
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