Supply and Demand
The most basic principle of economics has contributed to this year's rise in gold prices. Over the last few years, gold mining has decreased. The reduction in available supply can be caused by depleted veins, personnel reductions, and even societal events like civil wars or economic fallout. As the supply of gold decreases and the metal becomes more scarce, the price goes up. Over the next few years, experts predict that gold prices will continue to increase while the supply of gold is expected to decrease 15-20%.
Several major global events have impacted the price of gold this year, the biggest being the Brexit. On June 23rd, the people of the United Kingdom voted to leave the European Union. While the official break won’t happen for several years, the world economy is already feeling the effects of that historic day. Some politicians and economic experts warned that Brexit would cause the British economy to collapse but their predictions were proven wrong in the days and weeks that followed. As the fiat euro lost points the night of the vote, investors bailed and bought gold just in case. This finally pushed gold over the $1,300 price point that experts said would never happen and the British economy is still standing despite predictions of collapse.
The US Dollar and The Fed
Overall, the US dollar continued to weaken this year despite the Federal Reverse's predictions that the economy was stronger than ever. In February, the dollar took a nosedive while investors turned to the euro and yen. The dollar dropped 1.7%, the biggest drop since the Fed raised interest rates in 2015. Janet Yellen, Chair of the Board of Governors of the Federal Reserve, has been saying for months that the Fed will raise rates in either the summer or fall of 2016. As a result, investors have been hesitant to invest in the dollar. Instead, the market is turning to precious metals, strengthening gold prices.
In these uncertain times, gold is a great investment. For gold and jewelry appraisals in Michigan, contact your local jeweler at Azzi.