Gold prices touch $1,500 as some question inflationary pressures

Tuesday, April 19th, 2011 By

Pure gold in vials

Gold prices are going up, and today they hit a record $1,500-per-ounce price. Image: Flickr / theredproject / CC BY-SA

Like all commodities, gold prices fluctuate. Today, after quality of United States debt was questioned by Standard and Poor’s, gold commodities hit a record high, $1,500 per ounce. This continues the upward trend in gold prices, though experts are split on the meaning of this milestone.

Spot price of gold hits record high

The price of gold has two major markers. The commodity price of gold is the general market price of purchasing shares of or stock in gold, usually known as “exchange-traded products.” It is also possible to purchase gold coins and gold bullion bars. Coins, which are more difficult to counterfeit, are usually sold at a higher price. Gold certificates are a middle ground, a promise that the gold indicated on the certificate is available and belongs to the owner. The spot price of gold is tied to the commodity price. Today’s spot price of gold hit $1,500 in U.S. dollars, an amount that gold has never hit in the past.

Worries of speculation in the gold market

Every time financial markets go through a downturn, the price of gold tends to spike. Investors often view gold as a hedge, a “safe haven” of investment. The idea is that gold will always maintain or increase in value, unlike currency. Since the value of currency of the United States was decoupled from gold, demand for gold has been going up. Gold is seen as a “hard” currency that will always maintain its value. Some financial experts are concerned that some individuals are using short-term financial solutions or installment loans as a way of buying into the gold market that may or may not be worth the investment. Speculation, over-investment and a possible bubble could mean that gold prices, like the prices of all other investments, could drop at any time.

Be wary of gold-investment advisers

Gold, like every other investment, comes with certain risks and rewards. Gold has historically been a strong investment, but dips in prices are possible with fluctuating demand, central bank policies changing and inflation levels of various currencies fluctuating. Some gold-investment advisers are pushing gold as the “only smart investment in today’s economy.” Many of these advisers are also selling gold investments. Gold can be a good investment, but as with all investment options, it should be balanced with other financial options.

Sources

Wall Street Journal
Kitco
Gold News

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