Coming back to the quintessential question of gold prices citing a record peak of $5000 mark, it isn’t that clarified as an axiom that the anticipated mark would be reached. Most analysts and finance contrarians look back in time to expect what the future might hold. Currently, the market statistics and finance fundamentals seem to clash and both may predict a different future scene in terms of gold prices. Whatever it is we shall discern the same here.
One of the highest driving factors in gold prices is a steep rise in the demand of gold from the Asian markets. The first half of 2013 saw an astounding flow of about 800 tons of gold bullion being exported to Asian boundaries. In the meanwhile, the same demand was reversely reflected in the form of ebbed gold holdings in the Western and European markets. Talking of India, where the government efforts in stopping people from buying more gold, the gold demand stands anywhere around 1,000 tons per annum. Add to that smuggled gold as well. Secondly, China is soon becoming the largest gold consumer in the world, leaving India behind.
Don’t just presume that all that rising gold demand will be sufficed from the Western gold shares. In fact, most of it will come from China itself, probably. China is itself the world’s largest gold producer, yet it doesn’t float its gold bullion beyond its boundaries. As the stats suggest a rising numbers of shut gold mines in the west; not because the supply has reduced but because the costs of maintaining a gold mine don’t befit gold mining as a viable business at fallen gold prices today. So you better hold onto that gold stakes you have as of now! As goes the law, shortage of supply with a high demand translates into escalated prices.
Gold is often taken to be an inflation hedge. Post-2008, though inflation is being touted to submerge slowly but steadily, it may not, perhaps, be the case as per some industry experts. The entire inflation saga is spiral and repeated patterns keep reappearing within the market. There has been no dedicated proof expelling the direct relationship of inflation and gold prices, but a hint of which can certainly be seen from the current market trends. For now it seems that inflation is here to stay and so will eventually affect the gold prices as well.