Gold is one of the most polarizing commodities currently offered on the market. It seems like you can always find someone who is staunchly against it and someone who thinks it is the only thing worth buying. I’ve rarely met people who hold opinions in the middle. It has to be one of the most over-hyped commodities on the market.
There is no question that gold has had an amazing run over the last decade. It has doubled in value since 2008, broken multiple price records and 24 hour gold has recently priced at over $1600 per ounce. Even if it seems improbable, this gold mania is running at full strength. You may be asking yourself – – should I be buying, selling or holding gold? Personally, I think you should be buying or keeping gold. But, in order to make an informed decision, you must understand what influences gold prices.
There is an increased demand for resources because of the world’s growing economies. The increased demand for resources around the world has caused the shortages to develop around the world for a variety of commodities like food and finite resources like crude oil, potable water, minerals, energy and usable land. Gold is definitely benefiting from inflation and there’s no reason to expect that it will slow down anytime soon.
Chasing all of these commodities is a bunch of printed money from the US Federal Reserve. The dollar has lost most of its purchasing power since the Fed’s creation and there’s really no reason why the dollar will not just continue to fall over the long-term.
2. Supply & Demand
The balance between supply and demand is crucial in understanding how gold prices can remain so high. Gold mining provides the largest supply of gold that is on the market. The mining of this gold is very tightly controlled to prevent too much go