Why is the Price of Gold Increasing?

16/01/15 7:05 PM

This week has seen a surge in gold prices, with silver, platinum, and even palladium following suit. But what is causing the increase in the price of gold?

European Bonds and Stocks Take Hit, Dollar Suffers

The surge in gold prices can be directly attributed to a decision made by the Swiss Central Bank to end its three-year cap on the Swiss Franc. This has led most to believe that the European Central Bank will begin printing money in earnest this year, also called Quantitative Easing (QE.) The news had immediate effect on various European bonds and stocks of European-based companies, and caused investors to flee, once again, towards the safety of gold.

Future of Gold Prices

How long will gold prices continue to rise because of this? There are two streams of thought here. The first believes that Quantitative Easing in Europe will contribute towards inflation of the Euro in general, thereby increasing the price of gold, at least relative to the Euro. The other line of thought believes that QE will help many European economies, at least in the short term, and investments will again flow into bonds and stocks and away from precious metals, thus causing gold prices to sink. In either scenario, there is a great opportunity here to make money off of buying and selling gold, as gold prices are unlikely to remain at their current ~$1,270 an ounce levels.

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