What is the price of gold today? Has it decreased or increased? How much will be its price in coming one year? The sentiment on gold in India is very high and every Indian thinks of buying gold for special events like festivals, birthdays, marriages or for any other important events. These feelings are very common and strong in India. Indians are very sentimental towards gold because they know the value of gold very well since their ancestry. But how about the world looking at gold now? Surpisingly entire globe is looking at gold and its price, where it is heading?
The reasons to this kind of relentless bullish trend are many. Let us discuss some of them and try to understand some of the factors.
By seeing the price of gold and movement of dollar one can observe that if the dollar is weak, price of gold is in uptrend and if the dollar is strong, gold is in downtrend. But why the dollar is falling? Inflation in America and Europe is the main reason. Any one wants a safe investment in inflationary conditions, and gold is the only safest mode of investment in this scenario. According to Marc Faber, famous economist, inflation in America may touch 20%. If it happens, the price gold may rise further. So if the inflation is up the price of gold also would be up!
On the other side, China is also buying gold in large amounts, as a part of its foreign exchange reserves. China is a major investor in American bonds (denominated in US Dollars) and to protect itself from that loss, it has been buying gold. Obviously the price of gold is up.
The effect of recession is global. Many countries created a huge liquidity through their recovery packages for their economies and the release of money has been much increased, thereby it lead people to purchase gold, which is a safe investment.
BRIC (Brazil, Russia, India and China) Group is going to become strong and particularly Brazil and Russia do not want Dollar to be dominent. Brazil and China have decided to transact their trade in their own currencies only. So these steps also lead to the decline of the dollar and created hike in price of gold.
Last one but not the lease, the demand for the gold is increasing but the production of gold is low and not meeting the demand. So the gold is seeing it own new prices.
John Rubino, in his book, 'The collapse of Dollar and how to profit from it' had predicted the weaking of dollar in early years of the new millennium. He is expecting now the price of gold may touch 5000 dollars per an ounce. This is equivalent to Rupees 75000 per 10 grams! Would we see that really? We have to wait and watch!