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Dec 19, 2014

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Market Analysis

Home » Commodities » World Economies & The Gold Market

World Economies & The Gold Market

goldFor many people, the concept of gold investment is something of a foreign day. This is partially due to the curious nature of gold investment, as rather than being a typical stock or commodity, gold operates on an international price, and is traded through the physical purchase of gold bullion. It’s actually quite simple to invest in gold – you can simple purchase gold from BullionVault or a similar site, and either withdraw it or have it stored until you see fit to sell it. What is more complicated is reading trends in the gold market, as these trends depend on the international economy, rather than on a single company, currency, industry or economic system. However, to help get you started, here is a brief look at how three of the most influential economies in the world may affect the gold market in the coming months headed into 2013.

United States

One might assume that the United States was headed toward a time of stability following the conclusion of a long presidential election. However, thanks to the looming “fiscal cliff,” the economy in the United States may be anything but stable. The fiscal cliff is essentially a series of expiring deals regarding national spending and tax rates, and if it is allowed to pass without any sort of action regarding new deals on spending and taxes, the U.S. economy is bound to take a dive. Should this occur, it is likely that the price of gold would rise as a consequence, with investors buying gold to protect their assets against what would be a declining dollar.

Europe

The Eurozone is mired in a steady decline lately, and while there are some modest prospects for improvement in the coming months, the general consensus is that the Eurozone will face a long road toward recovery. The result of this is that the value of the euro may continue to decline – particularly in relation to what is currently a strengthening dollar. If the Eurozone continues to struggle and the fiscal cliff causes turmoil in the U.S., the price of gold could rise sharply. On the other hand, if the United States manages to pass by its fiscal cliff with suitable solutions, and the euro simultaneously loses value, it may be difficult to predict whether European investors would support gold or the dollar more.

China

In China, the key elements with regard to impacting the price of gold are simple: supply and demand. There are many in China who are confident that the demand for gold bullion and gold prices will keep increasing in China over the next year, while production of gold may slow to some extent. This is not a sure thing, but should it prove to be accurate, it could have a measurable impact in driving the price of gold up, as the Chinese market makes up a significant portion of the world gold buying population.

This is a guest post written by freelancer Brad Ellis, on behalf of BullionVault.

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