On Friday gold closed for the first time at an astonishing $1146.40 an ounce on the Comex Division of the New York Mercantile Exchange, despite a higher dollar index. Fridays closing was an increase of $5 from the previous day close of $1141.40. This comes just two days after gold reached an all time high of $1151.20 an ounce before dropping back down to $1141.00 an ounce.
Today’s closing marks the 6th consecutive session that gold had increased in value. As economic uncertainties continue to brew a greater demand for gold is to be expected.
The price of gold has been on the rise. On average ,gold has increased in value 18.9% per year over the past 5 years. This year alone gold has increased 28.6%. If prices continue to increase we could see a 30% increase in gold this year.
What factors weigh in on the price of gold? Well there are many factors that dictate which direction the price of gold heads. For starters, gold is directly tied to the United States currency or the green back. In general the two have an inverse relationship. As the dollar decreases in value the price of gold generally tends to increase. The value of the green back is tracked minute by minute using the DYX Index.
There are many other factors such as news of gold shortages, large purchases of gold, or other outside factors that influence the price of gold. Like many other commodities this is a demonstration of the law of supply and demand. When there is a supply shortage (imaginary or actual) or expected shortage, gold becomes more valuable because there is a limited amount of it and many people have an interest in obtaining it.
Another factor that drives demand for gold (ultimately the price of gold) is the fear of inflation or perceived fear of the dollar decreasing in value. Many people convert their green back to gold when they fear that the dollar will lose a significant amount of buying power. Gold has never been valued at zero while many other currencies have.
It will be interesting to see how the remainder of this year plays out. We could very well see gold increase over 30% as it did in 2007 when it finished out at 30.9%.
Be sure to check back Monday morning for our weekly gold price predictions. Here we will tell you what we believe the weekly high will be and at what price gold will close at on Friday.
The staff at Healthy Financial Habits is committed to delivering accurate and fast news pertaining to commodities and other investments. Please check back frequently for news updates, advice and investment strategies that will help you to develop healthy financial habits. As always it is important to consult with a financial adviser before making any investment decisions.
Author: Greg Jackson