With rising inflation, a weakening dollar, and uncertainty in the world economy, it’s not surprising that gold prices are continuing to rise. The value of gold has already risen as high as 9 percent, and many financial analysts expect gold will continue increasing in value. Here are three factors that could fuel a continued upward trend for gold this year.
Uncertain Economic Policy
A changing of the guard in the federal government always comes with some level of anxiety among investors. Many expect economic policies to shift as the new administration acts on what it calls “pro-business policies” but regardless of what change actually occurs, uncertainty is impacting the markets. Continued instability in other parts of the world add to the effect, keeping investors cautious and pushing them toward more stable options such as gold.
Kiplinger predicts by the end of the year, overall inflation will be 2.5 percent. Compared to the 2.1 percent rate in Dec. 2016, that reflects a 19 percent increase. Inflation refers to a sustained increase in the price of goods and services; when it rises, it means that each dollar you have or earn buys less. Since many investments are based on the dollar, rising inflation can cause those assets to be devalued. Historically, gold values rise with inflation because investors turn from dollar-backed options to precious metals.
A Weakening Dollar
Year-over-year comparisons show the dollar is still up historically and it’s certainly still much higher than it was in 2014 and prior years. However, the value of the dollar took a short plunge at the beginning of February and has yet to fully recover. Any time the dollar struggles, gold tends to shine.
Overall, gold has long been a safe harbor for investments in response to inflationary pressures and uncertainty, and it has routinely regained value even after drops. This is what makes it so attractive, as does the fact that it’s a physical investment as opposed to an on-paper investment (such as stocks and shares). By establishing a gold IRA, you can help plan for your future and take advantage of any gains that occur.