Gold prices are up about 11% this year and show little sign of slowing down. This week has been another profitable one for the yellow metal as geo-political issues are heating up overseas. It seems the situation in Ukraine is nearing a boiling point, which has investors eager to protect their wealth with safe haven investments like precious metals. On a more benign note, The European Central Bank has decided to leave interest rates as they are, which also bodes well for gold. Here is a look at how these events are shaping the future of gold.
Russia and Ukraine – What It Means for Gold
Russia’s military pressure on Ukraine has got investors worried. On Monday, the S&P 500 fell more than 13 points – the biggest drop in over a month. The Dow Jones fell more than 153 points as well. Any moment when global uncertainty arises, the stock markets tend to suffer while gold shines. A recent article by TheWeek.com had this to say:
“When uncertainty and even downright panic grips other parts of global financial markets, the tried and true reflex is to buy gold. The price of gold surged 2.2 percent Monday to set a four-month high at $1,351 an ounce in New York futures trading. The metal is still widely seen as the classic ‘safe haven’ investment in times of turmoil, so it’s hardly surprising that it has posted such significant gains.”
Gold May Near $1,433 per ounce
Kathleen Brooks is the research director at Forex.com. She speculates that if the situation between Russia and Ukraine continues, gold may break into the $1,400 (or even $1,433) per ounce mark. This conflict has escalated so much that it’s gotten the attention of China – the world’s largest consumer of gold. The turmoil between Russia and Ukraine sent trading volumes on the Shanghai Gold Exchange soaring up to a three-month high.
These types of conflicts don’t simply end overnight. As the unrest progresses, it will only mean better news for the yellow metal. When stock markets across the world take serious hits, this means investors will flock to gold. Naturally, as demand for gold increases, so does the gold price.
The European Central Bank and Gold
On Thursday, the European Central Bank chose to leave interest rates on hold. Furthermore, there were no additional measures mentioned to help bolster a fragile euro zone recovery. How does this affect gold? These measures, or rather the lack thereof, helped to boost the value of the euro, which caused the dollar to naturally devalue in comparison. As the dollar devalues, gold becomes much more appetizing. Again, gold comes to the rescue for investors who choose to move their money away from fluctuating currency and convert it into a more stable asset.
As shown by just this lack of activity by the ECB, currency can be affected rather easily. Furthermore, holding currency or money in a savings account is subject to inflation as the months and years go by. Savvy investors often choose to hold a portion of their wealth in precious metals, like gold and silver, to stay protected from currency manipulation and inflation.
Have any Questions? Talk with an American Bullion Expert Today.
American Bullion is a nationally listed precious metals dealer that specializes in gold retirement accounts. We help clients roll over or transfer funds to a precious metals IRA, whether it’s a Gold IRA, Silver IRA, or other precious metals. We pride ourselves in providing a tax-free and hassle-free rollover process along with a comfortable atmosphere for clients to buy gold. For more information, speak with one of our knowledgeable precious metals experts today at 1-800-326-9598.
Sources: ABCNews, Reuters, ThisIsMoney