The Price of Gold: Developments in Recent Months

Gold is a commodity that has attracted a great deal of interest in recent months – a circumstance that should not surprise anyone familiar with the history of this precious metal.  Since ancient times, gold has been regarded as a safe way to store wealth.  Though no investment is completely free of risk, gold is still seen today as a way to protect and build assets, particularly during trying economic times such as we have seen in recent months.

As governments throughout Europe implement austerity measures and struggle to meet their debt obligations, more investors are regarding gold as a safe haven for their funds.  This has caused the price of the metal to steadily climb.  In January of 2011, the average monthly gold price was £858 or US$1,356 per troy ounce.  By March the average had increased to £881 or US$1,424, and in May the average reached £925 or US$1,510.  On the last trading day in July, the price reached £990 or US$1,626, indicating that the demand for gold continues to build.

In fact, the average monthly price for gold has shown no decline since January of 2010, when it took a slight dip.  Longer-term data also support the idea that investing in gold has been on the rise for years.  The price per troy ounce has steadily increased since 2002, with a growing number of investors deciding to buy gold online as more trading migrates to the World Wide Web.

It is not difficult to determine the reason behind gold's attractiveness at the current time.  Most nations in the world now use a fiat currency – a paper currency that is backed by little besides the people's faith that the currency has value.  Fiat currencies can be readily manipulated by governments in distress; the government can decide to print more money than usual, causing the nation's banknotes to fall in value as inflation takes off.

As the global economic situation becomes more precarious, investors are more likely to worry that inflation may eat away at the value of assets held in cash.  One solution to this is to purchase gold and hold that instead of cash.  Gold cannot be manufactured on demand the way that paper currency can, and its scarcity essentially ensures its continuing value.  These factors have led to increased numbers of investors purchasing gold, as it can be regarded it as a stable investment during times of economic uncertainty.