From a long-term perspective, gold has a high value. Approximately 51 years ago, the United States ended the gold standard, meaning that the dollar was no longer backed by an equivalent amount of gold. Since then, the value of gold has risen significantly. 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.
Gold is often considered a safe haven for investors in turbulent times. When expected or actual yields on bonds, stocks and real estate fall, interest in investing in gold can increase and drive up its price. Gold can be used as a hedge to protect against economic events such as currency devaluation or inflation. In addition, gold is also considered to provide protection during periods of political instability.
Gold is starting to reappear as Bitcoin cools and the Delta COVID variety begins to shake the markets again. When U.S. government bond yields rise, gold is likely to trend sideways or even downward, while falling yields tend to cause very positive movements in gold prices. By placing the Fibonacci grid on the gold price pattern, we will see some stages of development of the lifespan of the gold trend.
Since gold is also considered a very effective portfolio diversifier due to its low and negative correlation with major asset classes, it tends to rebound in times of uncertainty, so one of the factors to consider is the relationship between gold and other asset classes that feel pressure or pleasure in current financial circumstances. Of course, gold is also consumed as jewelry, and there are large increases in demand even by world governments that seek gold as a store of value that they hold in central banks. However, demand in the main gold-consuming countries, India and China, has not been up to par this year. Most novice gold investors believe that if inflation rises in the U.S.
In the US, the price of gold should also rise, as more dollars of inflation will have to be paid per ounce. Therefore, monsoons play an important role in the consumption of gold because if the harvest is good, farmers buy gold with their profits to create assets. For example, India consumes between 800 and 850 tons of gold annually and rural India accounts for 60 percent of the country's gold consumption. That said, the price of gold could skyrocket at this important juncture and have lasting movements for gold price predictions for the next 5 years.
After adjusting for inflation, gold has achieved a return of approximately 6 times since the end of the gold standard. The dollar is likely to drive up the price of gold due to increased demand (because you can buy more gold when the dollar is weaker). Gold is not only known for being a factor that diversifies portfolios, but because fears of inflation are increasing, investors tend to turn to gold because it is considered a good hedge against rising prices. Gold and inflation also work together, since inflation is one way in which money can devalue quickly, and when this happens, people prefer to keep their money in something that increases in value rather than in something that increases in value, such as gold.
If investor demand for gold increases as people seek to diversify their portfolios, for example, that could influence the rise in gold prices.