Gold price in the international market zoomed to record highs in
recent months. In tune to the global rates gold price in India also
reached unprecedented levels. Why price of gold and other precious
metals and rising so fast ? There are many reasons for the current
1. Investors across the world turned to Gold as it is the safest
investment method during volatile times. Investors are doubtful about
a quick recovery in the US and other European economies which are
struggling to recover from the current financial crisis. In volatile
and uncertain times gold provides a safe heaven.
2. Weakening Dollar also forced investors to switch to other
investment methods like Gold and Stocks. Increasing US debts is
putting pressure of Dollar and it is moving south against popular
currencies like Euro and Yen. For eg in 2001 1 Euro was equal to 85
cents but now you have to spend 1.5 dollar to get one Euro. Similarly
dollar crashed against many major currencies. Investors are fearing
more weakness in dollar so they are moving to other safe investment
3. Recently Indian Central Bank - Reserve Bank of India bought 200
tones of Gold from International Monetary Fund (IMF). Investors are
hoping more such actions in the coming months as dollar is loosing its
global currency status gradually.
4. Rising inflation in US and Europe is another reason for investors
to turn to Gold.
These are the major reasons for the current rally in Gold but there
are many reasons too like
1. Demand exceed supply : Even though Gold demand increases day by day
supply and discovery of new gold mines is not at par with the
2. Trading in Gold attracted many investors to move to Gold as it is
safe and easy to purchase and maintain compared to traditional gold
investment methods like Jewelery and Gold Coins. Gold Trading Funds
and investing in Gold Futures created more demands for Gold and that
triggered a price rice in the recent years.
As long as US and other major economies stay in recession and dollar
fall continues Gold prices are expected to rise or stay at current
Some economists have predicted that Gold may even reach $2000 levels
in 2010 !