Why Gold Price is Rising?

Why Gold Price is Rising?

Recently, many readers have asked me that, if there is a recession in USA and global economic slow down than why the gold price is rising? This is because a logical mind can’t understand this situation. I mean, if there is a recession and global economic slowdown than how come the price of gold is rising day by day?

So I thought that, I should explain this fact to the people who don’t know much about the gold price movements.

Well, See. Traditionally the Gold price is correlated with the US Monetary Base (Money Supply). Money Supply/Monetary Base is the total currency in circulation plus bank reserves.

After 1971, President Nixon of the United States removed the Gold Standard and the US Dollar became free float currency. This means that the US Government can now print any amount of money according to the need of economy.

Thus, the modern money is the Currency (Also known as Fiat Money) without having any intrinsic value in it.

Previously (Before 1971), the US Dollar and all the other currencies of the world were backed by some amount of gold.

[Image Source: DollarDaze.org]

Ok. Now, see the above diagram. It is the diagram of the US Monetary Base means money in circulation plus bank reserves. Since 2008, The US Government has increased its monetary base from US $ 800 Billion to literally over US $ 2 Trillion ($ 2000 Billion).

Thus, the US Government has printed US $ 1.2 Trillion ($ 1200 Billion) out of thin air in the true sense.

So this newly printed money is diluting the purchasing power of the existing money in the circulation and that’s why now there are more dollars in the circulation to chase the same amount of gold and that’s why the price of gold is rising.

Central Banks and Governments from all around the world are playing with money. They have manipulated the money in a bad manner. And by printing more money, they are causing more and more inflation and stealing the wealth of hard working people and savers from all around the world.

Once upon a time, Save money was used to be a Golden financial advise. But today if you follow this advise than you will definitely get poor. Because if you save money today than you are saving something the value of which is going down markedly day by day.

And that’s why the modern financial advise is – Save & Invest your money.

Thus, this is the reason why the price of gold is rising day after day. When I am writing this article, the US Government is planning to print more billions and trillions of dollars out of thin air which will shoot up the gold price further…!!!