Gold Prices And Its Relationship With Politics
Gold prices can be volatile at times due to a vast range of variants, however, investing in gold are often times is more stable than investing in currencies.
But how is the price of gold affected by politics? Here, we have provided you with insight into how politics and the economic state can affect the price of gold in the long term.
Politics And Its Effect On The Economy
As politics continues to have an effect on the economic stability of a number of countries it is important to look at the effect that it is having on the investment on the forex market as well as the economic stability of specific countries. With the USA and China trade deal having an impact on the economy in the states as well as the political uncertainty that has been bought about by the upcoming Brexit deadline, there could be an increase in the price of gold in the near future.
If the Brexit Deal as proposed by Boris Johnson was to go through the UK could loser an estimated £130bn in growth with just a 6.7% increase expected in the British pound over a 15-year period. Though this is bad news for the British economy, this could be of a benefit to the gold industry as the price is set to increase. Whether this is a substantial amount of just a small sum, there is a reason to suggest that there will be an increase due to more people seeing this as a worthwhile investment.
Economic Status And The Price Of Gold
When the economy begins to take a dive, many opt to buy gold as it is seen as a safe investment due to the very little movement in overall price. Not only is gold commonly used as a hedge for inflation, as the price of gold rises when the cost of living increases. This, therefore, makes gold a good store of wealth as it does not crumble when inflation begins to rise.
As the price of gold rises, you can then decide to either cash in or hold onto your investment as it does not lose its value over time. The only time the value of your gold will change is when the market begins to rise and fall. In addition to this, Geopolitical factors are also not affecting the price of gold as it is not affected by turmoil as many see it as a safe haven for their investments during upheaval such as wars and other ongoing issues.
Inflation And The Price Of Gold
As inflation begins to rise due to economic uncertainty and political issues, there are many that begin to invest in assets such as gold. This is due to it retaining its value. If the value of money drops, the price of gold begins to rise, therefore hedging the investor against this decrease. This is beneficial for businesses as well as individuals looking to invest as it will retain value for as long as you hold onto it.
Though the effectiveness of inflation hedging is oftentimes affected by the following variables
- Global Population Growth
- Technological Innovation
- Chinese Economic Growth
- Global infrastructure Spending
Therefore, you may not always be protected when investing in stocks or other elements, meaning that you have to be vigilant when looking to invest the same way you would when investing in a currency.
With this in mind, there are a number of reasons that so many people see gold as a worthwhile investment during times of political turmoil. Will you be investing in gold in 2019?