For quite a long time now, gold has been considered one of the best investment opportunities in the world. That is because it has a set of physical qualities that distinguish it from any other metal, as well as a constantly high value on the market.
The price of gold is established through trading or it can be formed on other derivative markets. It can be directly affected by many factors, such as the value of the US dollar, mining activity in areas that are rich in gold resources, as well as the demand of precious metals on Asian markets, such as China or India.
Last but not least, inflation is another factor that is said to influence the price of gold. Generically speaking, inflation is the economical phenomenon that causes an increase in the price of a basket of goods and services in a particular economy, during a specified period of time. It can have various effects, ranging from the more positive ones to the downright negative. For instance, it can increase investments, leading to a faster economical growth (which is actually called the Tobin effect). On the other hand, it can also determine people to start hoarding possessions, like food and other commodities, in order to get rid of the money that is about to devalue.
Experts say that inflation can actually have an effect on the price of gold as well. That happens because, when the supply of currency is inflated, the metal’s price increases as a result of the decrease in the per-unit value of the currency. Speaking in more usual terms, inflation can cause the price of precious metals to rise.
So, if you are thinking of investing in gold yourself, remember that this is not a decision you ought to take lightly. Take into consideration all the important things: your need for liquidity and quick profit, the amount of money you are planning on spending, as well as the economical context (inflation included). Only this way will you be able to make an informed choice from which you and your family will benefit for many years from now on.
Source by Jack Wogan
Is The Price Of Gold Tied To Inflation?
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