One of the first currencies used in recorded history was gold. However, the use of the precious metal as a form of payment or investment dwindled as the years went on. The gold standard was abandoned completely as the Depression of the 1930s occurred. Since then, gold has still had value but greater favor was placed on the currency.
This year 2016 seems set to change this trend. There are more countries, investors, and central banks that have begun to buy gold. This buying spree has led to an increase in the value and cost of the precious metal. It is a commodity which greater number of people are turning to. The question remains, what is causing this increase in the interest in the yellow metal?
A Weak Economy
In the latter stages of 2015, it was predicted that 2016 would see a slight rise in the global market. It was predicted that growth would occur on an international scale. The first few months of the new year have not seemed quite so promising, however. The growth percentage has since then been revised to an almost negligible 0.2 per cent.
The economic crisis that plagued European countries in 2015 has followed into this year as well. The continent and the European Union has accumulated a vast debt in an attempt to bail out several of its members. Europe is a large and important part of the global economy, its financial difficulties impact the market at large.
There were many countries relying upon the success of the Chinese market. China had experienced until recently, a large amount of economic wealth. The country, unfortunately, has been lately presenting symptoms of a fiscal bubble. The bubble, at this particular time, seems primed to burst. This leaves the Chinese economy a volatile market at best.
Drop in Oil Prices
For decades, now, oil has been a favorite amongst investors. Its booming prices and its necessity for daily activities made it a relatively safe venture. This began to change in the latter part of 2014. The price of oil has continued to drop, and in 2016 has done so sharply. The cost of this commodity has not been so low since 2013. Iran’s reappearance on the market and U.S. endeavors to find domestic suppliers are just two of the reasons for this decline.
The forecast for oil is not so optimistic, either. Currently fluctuating at around $41 per barrel, it seems unlikely for the commodity to reach its more opulent value between $90 and $100 a barrel. This dismal prediction means that less and less investors are placing their faith in oil.
The one commodity that people are turning to during the weak economy and spiraling oil prices, is gold. Investors and countries alike are rushing to invest in as much of the precious metal as they can. The quantity of gold that has been bought in recent times is significantly higher than in the past few years. It is seen as a safeguard against all the volatile activities currently taking place in the market.