Why is Gold so High?

What is going on with gold? Just a few years ago, in 2008, the price of gold started catching everybody's attention; it had risen to over $1,000 an ounce when it had been just $740 an ounce a year before.

Those numbers have continued to skyrocket, with gold approaching $2,000 an ounce

towards the end of 2011.How high can gold go? And why is it rising?

Gold has always been considered a hedge against financial disaster; gold is generally at its highest price when the economy is doing poorly. As an example, it is generally accepted economic lore that the price of gold will rise dramatically two weeks after a dramatic dip in stock market prices.

Similarly, when an economy is robust and the dollar is strong, gold generally falls to its lowest prices. It is no secret that the world economy has been suffering over the last few years; this is the generally accepted reason why gold pricing has skyrocketed. The price seems to rise with every bit of bad economic news, whether the downgrade of the United States debt rating or the possibility of default in Greece.

Although some are predicting that the price of gold will continue to rise, especially with the Federal Reserve holding interest rates so low, other economic experts who have been watching the price of gold over the past few years feel that the recent numbers are less reflective of any economic philosophy and now reflect a gold bubble. With the recent volatility it is difficult to tell which experts are correct; people could be buying gold because they fear that a world recession is on the horizon, or they could simply be speculating that the price will continue to rise.

Almost all of the experts agree that the internet is a big part of why gold has been so volatile. In the past, the only way that the average consumer could purchase gold was to buy physical gold from retail shops or through gold dealers; now it is very easy to purchase gold with the click of a mouse; EFTs, or exchange traded funds, have become very popular internet purchases for consumers, and are traded in much the same way that day traders traded tech stocks during the tech bubble.

Whether the pricing is the result of people hedging against economic hard times or if it is actually a bubble, there is little that can be done to help. Investors have always been advised to limit their gold holdings to approximately ten percent of their overall assets; this advice continues to be sage.

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