There haven’t been many catalysts to gold rate today like the one we had over the last ten years. It has almost become an omen for gold prices going up even though, when adjusted, they aren’t valued at the record-setting highs of the past.
Despite this, the underlying economics remain the exact same. Therefore, support for gold prices increasing will remain in place for some period of time. However, it is uncertain and debatable how long.
Federal Reserve and Gold Prices
It is important to understand the Federal Reserve’s actions as a catalyst. The Federal Reserve’s actions have been more effective in driving investors and interest toward gold than any other institution and will continue to do so, as Chairman Ben Bernanke has pledged that he would continue to print money and buy bonds.
It results in the devaluation, as well as the continued generation of unsustainable debt.
Even if quantitative easing was stopped immediately, the impact of Fed’s actions would be with us for years to come.
That’s the combination of debasement of U.S. dollars and high levels of debt that is responsible for the steady rise in gold prices.
Low interest rates are another major factor that contributes to the gold price’s support.
This is close to the Federal Reserve’s actions as to why gold’s price rose. And again, this is due to Ben Bernanke. Bernanke has said that he will not raise interest rates until the economy is strong. Contrary to what some economic reports claim, the economy is still in dire straits and Bernanke has no plans to increase interest rates anytime soon.
As long as this continues, gold will be supported.