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Can Gold Continue On Its Upward Trend?

April 11th, 2010 Jack Wagon No comments

From amongst the list of all the precious metals, gold is quite possibly the most popular as an investment. Gold is generally considered a safe investment for many reasons. Financial experts endorse gold as a good inflation proof investment in times of strife. This is mostly because gold is a dependable asset, which sustains its value even in times of economic and financial instability, or social tumult.

Gold is expected to continue the upward trend of last year this year as well amidst fears of global government deficits, and inflation. Analysts, however, have warned that the gains in gold could be sufficiently capped if the dollar managed to strengthen, or if jewellery demand failed to adjust to the higher price.

On the other hand, the gain last year was 25% in the gold price for the South African gold miners. This was offset by the 27% strengthening in the rand against the dollar, which continued to exert pressure on energy prices.

Recently Gold has proved to be a very attractive product, particularly for those who are investing in it. However, it would not be fair with the gold if one just take it as a safe investment. Regardless of its apparently never-ending rising trend, gold can sometimes be quite unstable on daily basis. Like just some weeks ago, the equity market showed a confused look, and a large number of business people had to reconsider the professed safety of gold.

Irrespective of the strength of any currency, be it weak or strong, the increase in gold has been historical, and this trend is expected to continue further.

A major problem arises in terms of gold because of its high prices, which is still on a climb, its buying and selling is now limited to investor-based and not consumer-based. If this trend continues to remain in the near future too, then ultimately the consumers and the investors both will surely experience continued instability in the market of gold.

In the current economic, and volatile global conditions, gold has proved to be the only safe investment. Investment demand affects the price of gold, which is basically related to the expected strength, or weakness of the US dollar. It is most likely that gold will continue its long-term upward trend in the next three years with renewed investment demand coming from gold investors for portfolio protection. The inequality in demand and supply can increase the volatility in the gold market. As the price of gold is increased, it will cause an increase in the demand for gold as compared to the supply.

The risk for the year 2010 is that the heavy level of investment demand in the year 2009 will need to be maintained for prices to keep gaining, unless other sectors such as jewellery can adjust to these high prices. If these other sectors, such as jewellery, are unable to adjust to these higher prices, the volatility may give way to added stress in the investor market.

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