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Gold North of $2000?

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Despite recent drops in the market price of gold, some investors are suggesting that it may reach the price of $2000 per ounce by the end of the week. Several notches higher that its current price of 1229 per ounce.

Gold is still an effective investment. Thus, good investors know that this dip is only temporary.

Why Gold is Down Now Relative To It’s Highest Highs

The 22nd day of April has been a rough day for gold. It opened at $1248.50/ounce, but it is currently at $1229.8/ounce. The drop was due to unstable patronizing of buying gold by the European and Asian markets.

The European and Asian markets are nervous about gold right now. In India, the government is restricting the gold purities that can be sold to 22k, 18k, and 14k increments.

This restriction is meant to serve as an aid for the Indian middle class, who may not understand gold purity. Jewelers were tricking them by mislabeling and overpricing their jewelry. Now, it will be very difficult for jewelers to do that.

The European Union has been having financial issues lately, especially with the Greek economy being in a deep recession. The Eurozone is less likely to purchase gold because of these issues.

They are still harvesting gold from their many gold deposits. Most of the gold they are buying is being bought from local vendors.

The strong United States Dollar is making gold more appealing to manufacturers and investors in the United States. A lack of international competition is making buying this gold a simpler process.

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A Long-Term Look at Gold

Gold is a good long-term investment. When the price of gold is down, people, especially manufacturers of luxury goods, are more inclined to buy gold.

Manufacturers will create items, such as jewelry, that are worth more than the gold on its own. Investors can hold onto it until gold is more expensive and sell it at a profit.

Central banks also invest in gold. While the gold standard is no longer used to measure the wealth of a country, many independent economists use it to evaluate the health of an economy.

China is the only country that uses the gold standard. China is one of the most important manufacturing countries in the world, it is extremely important that countries that trade with China keep gold in their banks. This shows China that they are willing to work with the Chinese government to trade for cheap goods.

In the United States of America, the price of gold is increasing. MCX Gold states that the current price of gold has gone up over 150 points.

 

What Happens When Gold Grows

When the price of gold goes up, more gold is put on the marketplace. Miners will work faster so they can get better prices for their gold. Investors will sell the gold they have stored.

There will be fewer people to purchase the gold. This means that if there is too much supply, the price will fall until it reaches equilibrium. That is the point where the amount of gold on sale and the number of gold people want to buy is equal.

Over time, if the equilibrium price of gold goes up, the prices for different basic commodities, like food and oil, will also increase. In other words, the interest rate will go up. Investing too heavily in gold can actually lead to a recession.

 

The Federal Reserve and Gold

The Federal Reserve, America’s central bank, is making preparations to raise rates. It is not known when they will do this. Economists are holding their breath while waiting for the announcement.

Most economists think that the rate hike will not be occurring until December. Some suggest it will occur sometime in the beginning of May. A think tank in New York City is convinced that the Feds will announce the rate hike months before it happens.

Previous incorrect predictions have left the Federal Reserve in a precarious state. International investors want to know what they are doing. This is one of the reasons the price of gold is falling. International investors think the United States has a weak economy.

Overall Examination

While the European and Asian markets are having trouble with the gold markets, the United States is buying more gold.

It is unknown what affect the Indian gold purity standards will have on the economy. The best thing that can happen is that the Indian middle class will buy more gold jewelry, making the price of gold increase.

Economies around the world will soon stabilize. Once that occurs, the investors in those countries will be more confident when they are buying gold. The equilibrium price of gold will increase, bringing with it greater prosperity for everyone.

This dip in the price of gold should only be temporary. In the long term, the price of gold will increase. The next quarter, we could see it rise to $2000/ounce.

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