In late 2010, scores of investment analysts were predicting that gold would reach $1,500 a troy ounce in 2011. This value has already been exceeded and set to reach even the most bullish trajectories made for the new year. In June, the price of gold remains well above $1,500 an ounce and continues to appreciate on a daily basis.
Investor interest in precious metals over the last few years has been driven by a faltering economy in which traditional investments have become more uncertain than ever. While the ‘90s made stocks the king of investments, the stock market crash at the turn of the century has led many investors to look for safer investments elsewhere especially in these times of economic instability.
After gold prices dropped in May following impressive growth, many investment analysts stated that they felt the fall was a natural correction. Investor Jim Pogoda said, “We rose too far, too fast. The bullish arguments - euro-zone debt fears, continued unrest and potential for spreading in the Middle East and North Africa region, and poor long-term prospects for the dollar - remain intact.”
In fact, there are a number of geopolitical factors that are causing the gold price to remain strong and to quickly recovery from periodic falls. Recently, news about escalating unemployment rates have created further investment fear and have led to another onslaught of safe-haven investing.
Growing economic powers, such as China, have created great demand on precious metal assets. The Central Bank of China has purchased large amounts of gold and has asked its citizens to do the same in order to retain the wealth of the country. Mexico’s central bank followed suit by trading in currency for over 93 tons of gold. This national confidence in precious metal assets has solidified worldwide investor belief that paper currency is no longer safe and that assets such as gold are the answer.
Precious metals have become legitimate investment classes among wealthy Wall Street tycoons and small-time investors alike. New and more convenient ways to invest in these solid assets have made it a simpler process to diversify investment portfolios. Exchange-traded funds, derivatives, and precious metal certificates are growing in popularity. To own precious metals such as silver and gold directly, bullion bars and certified coins are being stored as retainers of wealth. Even the most modest analyst predictions for gold in 2011 would bring in significant profits for precious metal enthusiasts.