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 options.
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 requirement.
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 levels.
Some economists have predicted that Gold may even reach $2000 levels in 2010 !