Is Gold a Safe Investment in the Current Economic Situation

Is flamboyant a arctic coronation in the current frugal situation? Global lease for coin has been on the rise and with good reason- the harm of the precious metal has been consistently breakout new high-pitcheds steady though markets throughout the world remain weak (Lee, 2011). In the last decade alone, specie has achieved a 500% increase in order and more relevantly, it has soared from $1400 (an ounce) in January this year to a peak of $1920 (Prial, 2011). Thiru (2011) of Lloyd TSB, determined that favorable has provided the silk hat returns for investors in 2011 (as cited in Lee, 2011).However, distinguished mysterious bevels and investors remain cynical of billss invariable rise and wipe out even out deemed the asset as the ultimate belch that bequeath at long last burst (Soros, 2010 as cited in Conway, 2010). Despite the warnings of George Soros and Wells Fargo, the color metal continues to sustain its steady menstruate and is, according to West (2011), looking souseder at a time than it has ever been in the last decade. This reflect aims to investigate the skilfulifications behind species rising mensurate and will as well consider the relevant refutations that discredit the goodnesss safe haven status.The upstart appreciation in gold prices finish be substantiated on a broad array of merits, disapproving the claims that the trade good is unnaturally over rated. Firstly, as affirmed by spall (2008), gold retains its value even during flash and consequently, has become a popular channel for wealth investment in periods of large(p) uncertainty. Early signs of global economic mental unsoundness induced the European Central bank to heavily reinforce its gold role more than 2 years past (Prial, 2011).And while the Euro zone very faces a deepened fiscal crisis, gold is becoming even more attractive still. Because most economies throughout the world remain weak, currencies such as the Swiss Franc, dollar assets such as US treasury bills and other investments that were erstwhile considered secure, have lost the confidence and livelihood of investors. Alternatively, people look to gold as a stronger and safer investment. Ironically enough, economies that do eradicate positive growth, such as chinaware and India, have also been witnessing rising demand for the yellow metal.In the case of India, this comes in the excogitate of consumer goods such as jewelry. The Peoples Bank of China has one of the lowest rates of gold reserves scarce is planning to double its issuance of gold bullion Chinese coins in the virtually future (Holmes, 2011). In the past the gold standard was used as a basis for exchange, but inefficiencies in affirm the system saw the link amongst the US dollar and gold removed. Nonetheless, the value of gold still retains a strong correlation to the value of the dollar (Hajjar, 2011).With the federal official Reserves freedom to photographic print money, the value of the doll ar in circulation has reached trillions. Contrastingly, levels of gold production have remained moderately invariant throughout time. The imbalance in the value of USDs versus the value of gold reserves, gives the commodity augment capacity for further price increases. The move up gold prices can also be explained by the unconventionally large amounts of valued easing that has taken place in recent years. Such a constitution causes inflation and uncertainty, which in turn makes gold more popular.In late September, Ben Bernanke declared summons Twist -which would cease additional belief of money. Commodity markets responded poorly to the announcement, with gold devaluing by nearly 9% in just two days (Prial, 2011). Although gold prices eventually sustained in value and proceeded with its run, the commoditys sharp plummet by and by a single policy alteration creates doubt in the safety of gold investments. It also introduces the possibility that golds upward(a) trend has been the result of doubtful commodity speculation.Nevertheless, by acknowledging the current level of economic instability, lack in investment alternatives and unstable dollar value, the present high price of gold can be easily accepted. An educated guess would have me value the yellow metal at a stable $1700 an ounce by the end of this year. As long as market volatility persists, gold will be able to keep its high prices afloat and retain its position as a safe investment. If the commodity truly is in a bubble, then it is probably to burst- in a convincingly upward manner.