InvestorQ : Why the gold prices are moving up so sharply and what does that indicate?
Crowny Pinto made post

Why the gold prices are moving up so sharply and what does that indicate?

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2 years ago
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You are right that gold price in the international market has touched a 6 year high and has crossed $1400/oz. The last time this rate was seen was in September 2013. Actually, there are two reasons for this sharp rise in the price of gold. Firstly, the situation in the Middle East is getting increasingly uncertain with Iran and the US getting close to a war like situation. Normally, gold prices tend to go up when there is such a war-like situation in the global markets as investors prefer the safety of gold in such situations. Secondly, the central banks across the world (including the Fed and the ECB) are again going back to lower rates and higher liquidity situation. This is normally a situation when a lot of investors prefer gold as a currency. You may have noticed that the Chinese central bank has been buying gold heavily in the last few months as it prefers to hold gold than to hold dollars.

Generally, rising prices of gold are not positive for equities and equity markets tend to correct when gold prices are on the way up. This time around, gold has appreciated quite rapidly and that is a signal that investors may be find equity and bond markets slightly stretched.




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