Gold Is In! The Bulls Are Running!

Friday, April 29, 2016

Have you been watching the movement in gold this year? If not, I can catch you up pretty quickly. The value of the precious metal has climbed from $1,063.22 per ounce to $1,291.79 per ounce. Sure, there has been some downward movement, but for the most part, gold has been gaining! So, what's going on? Today, we'll talk about what has sent the price of gold upward, and what we can expect to see throughout the rest of the year.

The Key Word Is Uncertainty!

Gold is a very interesting commodity. You see, the value of the precious metal is highly dependent on the conditions in the global economy, currency market conditions, and stock market conditions. Gold, as a safe haven investment, tends to move up in value when any of these factors have the key word uncertainty revolving around them, and this year, they all have. Here's what's been going on...

  • Global Economy – When it comes to the market, there has been nothing that has led to more uncertainty than the global economy thus far this year. The reality is that there are several major economies that are teetering on the brink of an outright crisis. This year alone, we've seen multiple central banks enact lower interest rates, extend bond purchases, and some have even taken their interest rates into negative territory in an attempt to save their economies. While conditions may seem on the up and up in the United States, the Federal Reserve's delays on the interest rate hike are proving otherwise. All in all, global economic conditions are a major cause for concern.
  • Currency Market Conditions – Because gold is priced using the USD, the value movements in the precious metal are often dependent on changes to the USD value. The higher the USD goes, the more expensive gold is in other nations, leading to declines in demand and price. However, the USD hasn't been climbing as much as we thought it would this year. In fact, we've seen quite a bit of downward movement. This is making gold less expensive in countries outside of the United States, causing demand to spike and leading to growth in the value of the metal.
  • Stock Market Conditions – In the beginning of the year, we saw a rather large crash in the market. This sent safe haven investors running to gold, sending the value of the precious metal skyrocketing. However, the market has been improving quite a bit as of late. More often than not, we're seeing upward movement in the stock market. Nonetheless, this is creating yet another concern. With economic conditions proving to be a primary cause of concern, why is the stock market reaching record highs? Something isn't adding up, and that's leading to that key word yet again. The bottom line is that at the moment, market conditions are uncertain at best, leading to heavy demand from safe haven investors.

What We Can Expect To See Moving Forward

Moving forward, I'm expecting to see quite a bit of upward activity in the price of gold. The reality is that uncertainty in the global economy, stock market, and currency market is not going away any time soon. As a result, investors are likely to continue stowing money away into the precious metal to prepare for the crash that seems to be guaranteed to happen relatively soon. At the end of the year, 2016 is likely to prove to be one of the best years in history for gold. 

Joshua Rodriguez

Joshua Rodriguez is an avid financial professional. He is the owner and founder of CNA Finance, a partner at Modest Money, and a writer for US News & World Report, Investing.com, and more! Joshua takes a strong fundamental approach to market analysis and enjoys offering his take on what we can expect moving forward. You can reach Joshua at cnafinancehelp@gmail.com.