Over the last decade, precious metals and Gold in particular has been one of the better performing investments of its class. On April 19th,a new all-time record high was hit, when the spot price of Gold crossed the $1500 mark. Since April of 2001, Gold prices have increased by over 470 percent. The question for most investors now, is whether the price increase will continue.
The underlying premise, which has been demonstrated historically, is that Gold is seen as a safe haven. When economic and other conditions deteriotate, safe bets are placed on Gold. If there are any negative conditions appearing, or continue to maintain a potential to develop, or if uncertainty surrounds politcal or economic issues, then the price of Gold can continue to increase.
There are several reasons why many experts believe that Gold Prices will continue to rise. Some have even predicted that it may soon cross the $2000 mark.
In the short term there still appears to economic turmoil among several European countries, and bailouts may be necessary. Bailouts may come from the sale of euros, which in turn increase the demand for gold as an investment.
In the U.S.the dollar has weakenened as the world’s major currency, and inflation, although muted, remains as a strong possibility. When the world`s major currency weakens, investors look elsewhere, and in this case, they may continue to look at the shiny precious metal.
Military conflicts in the Middle East regions, are a harbor for higher oil prices, that can trigger inflation. Higher prices usually mean lower returns from investments such as stocks, and for better returns, investors turn to other assets such as gold, resulting in increased demand.
There are other forces, such as the large amount of retiring baby boomers, who may need pensions from countries with very low savings. Printing money to fund retirement plans, is mostly likely to fuel inflation, with a corresponding increased demand for Gold.
On the other hand, there are a few experts that contend, that Gold prices are about to peak. With the U.S. entering into an economic recovery, it is expected that the dollar will regain its footing, and the turmoils will subside. The U.S. is still the world’s major economic and political power, and it`s influence will be used to persuade other countries in economic and political reforms.
With the spectre of inflation and lingering economic uncertainty, just as it has happened over the last decade, the outlook for Gold prices remain positive. In fact the majority of analysts and experts predict a continued increase in the coming years. There are a wide number of target prices for the years 2013 and 2014. Almost all predictions estimate a price over $1700 in 2012 and over $2100 in 2013. Many are predicting a peak, when the price approaches $3200 sometime after the year 2016.
Despite the positve outlook for the price of gold there could always be some unexpected forces that can have an inverse effect on prices.There may still be lots of money to be made on investing in Gold, but enthusiasm should be tempered, and investors must always be reminded, that it is never a wise decision to put all the eggs in one basket.