It is supposed to act as a safety net when markets are in decline, since the price of gold does not usually move with market prices. For this reason, it can also be considered a risky investment, since history has shown that the price of gold does not always rise, especially when the markets are rising. Of all the metals on Earth, gold shines the brightest when it comes to maintaining its value and being a vehicle for building and preserving wealth. In fact, the price of gold has risen more than 400 percent compared to 20 years ago.
Lundin pointed to patterns on technical charts that show bullish signs of an imminent long-term rise in the price of gold. Gold is expected to reach approximately the long-term rate of inflation, according to Charlie Fitzgerald, certified financial planner at Moisand Fitzgerald Tamayo in Orlando, Florida. Gold can be used as a hedge to protect against economic events such as currency devaluation or inflation. In times of economic uncertainty, such as in times of economic recession, more and more people are resorting to investing in gold because of its enduring value.
India's gold consumption in the second half of each year is usually higher than in the first half of the year, and coincides with October's Diwali (early first quarter), according to data from the World Gold Council. People usually dedicate their purchases of gold during Diwali to deities, especially to Lakshmi, the goddess of wealth. As central banks diversify their monetary reserves from the paper currencies they have accumulated to becoming gold, the price of gold tends to rise. On the industrial side, gold is used in electronics and is benefiting from the rise of nanotechnology.
The dollar and the desire to keep gold as a hedge against inflation and currency devaluation help boost the price of the precious metal. When expected or actual yields on bonds, stocks and real estate fall, interest in investing in gold can increase and drive up its price. Since 1971, when the gold standard was abandoned, gold prices have seen largely positive changes during recessions. In addition, high inflation is eroding the purchasing power of each dollar, encouraging investment in a tangible asset such as gold and other hard assets.
Nowadays, gold is sought, not only for investment purposes and to make jewelry, but it is also used in the manufacture of certain electronic and medical devices. The price of gold is generally inversely related to the value of the United States dollar because the metal is denominated in dollars.