5 Reasons Why the Gold Price Will Rise Rapidly

To feel comfortable with investing in precious metals, investors need to be aware of the reasons for the expected rise in the gold price. In no particular order, these are the primary reasons why the stage is set for making your fortune.

1. Selling of Gold by the Gold Cartel - the Gold cartel is made up of the US Government and a collection of bullion and central banks. Central banks have long been sources of gold bullion used to manipulate the market and suppress the price of gold - but they are running out. Gold has been sold in such large quantities to control the price, there is not sufficient production to reverse, or even slow down the depletion of gold bullion stocks. The only way of slowing down demand is to let the price rise. However hard they try to manipulate the market, classic supply and demand will win.

2. Shortage of Supply - the current economic conditions combined with the increase in production costs have slowed down gold exploration and production. In addition, the infrastructural problems of South Africa have significantly effected their output.

3. Transfer of Gold Depositories - Hong Kong has recently completed a high tech security vault at the city Airport. The Hong Kong Authorities are, as we speak, transferring its gold holdings from London to its new secure depository. A move like this sends a message - we will be accumulating gold, and we want it safely stored where we can see and control it, where we can access it instantly, and where its out of harms way.

4. Increasing war and social unrest - war and social insurrection can escalate rapidly. The world is already engaged in more conflict than at any time since the second world war. The Chinese are long term thinkers and are undoubtedly taking this in to account as they accumulate gold and silver to store it close to home.

5. China is adding to its gold reserves - China is making no secret of the fact that it intends to increase its gold reserves, and now holds in excess of 1050 metric tons.

The effect of gold and oil prices upon international stock market indexes

Investors have historically used simple risk adherent strategies in their portfolios such as diversifying across countries and including gold or oil investments because these two investments typically had an inverse relationship with stock market movements. Technology has changed the environment where there are very few obstacles to hinder investors to buy or sell assets anywhere in the world today. There are also many other options for investors to use for risk aversion so that gold or oil might be considered as merely another commodity. This study investigated the relationships between gold, oil, and various international stock indexes. The results show that there is a strong, positive association between the international stock indexes. There are also significant positive relationships between oil and stock prices, while gold's expected inverse relationship with stock prices has changed over time. The positive relationships suggest that some traditional portfolio risk techniques may no longer be valid.

Gold Price is No Bubble

The price performance of gold recently has all sorts of armchair economists waxing philosophical on the idea that this is the advent of a price “bubble”. While certainly everyone has and is entitled to their opinion, there are other features of humanity that we all possess, and much like many opinions, are best obscured from view.

Declaring that gold is in a “bubble” demonstrates complete ignorance of or disregard for the fundamental drivers of the almost ten year ascent of gold. And saying that the price is forming a bubble implies that, like the real estate bubble, the tech bubble, and the tulip bubble, the price must necessarily “pop” and return to a sustainable long term average.

During each of the bubbles of recent and distant history, the cause of the meteoric price ascents of these various asset classes were all predicated by the same string of events.

Supply was far outstripped by demand because the public perception emerged that the asset class in question was the ultimate asset class at that point in time. Disproportionately high levels of capital were directed to them, and upon the eventual discovery that supply could easily meet and exceed demand, the bubble pops, the price declines, and the herd mentality resumes its frantic search for the next ‘ultimate’ asset class.

Homes, technology and tulips are all a product of effort. With increased effort, more of each of these can be created. Supply can easily be ramped up to meet demand.

Golden spike: Boom times for precious metal

The price of the precious metal is soaring, hitting a record $1,119 an ounce on Wednesday — confounding market analysts who thought there was no way gold would remain so expensive when it first cracked the unheard-of $1,000 mark last year.

The remarkable run has implications far beyond savvy investors. In New York's diamond district, more people started showing up late last year to sell their gold, and the crush hasn't let up, said Anthony Iannelli, owner of Iannelli Diamonds.

"They're bringing in jewelry from the '70s and '80s they don't wear anymore," he said. "They're following the news and see prices are high. They realize they have a little cache, and want to take it out of the vault."

Typically, gold is a safe place for investors to park their money, not something they buy to make money. It doesn't earn any interest, and because it's always sought-after, its value tends to be fairly stable.

For example, when gold first reached $1,000 it was in March 2008, shortly after the collapse of investment bank Bear Stearns. Investors bought it up then because they feared for the stability of the financial system.