Gold Benefits From Demand For Safety

Gold is one of the oldest investment products in the global market. The precious metal is considered by investors as a good investment because of its unfaltering value. Some also feel proud of owning such a rare material, albeit the fact that supply of gold has significantly increased over the years as gold mines continue to be discovered.

For traders and investors, however, the value of gold becomes more apparent during periods of economic unrest. During times when people are dumping high-risk assets, the demand for safe havens relatively increase, one of which is gold.

Other safe havens are the US Dollar and Japanese Yen, currencies of two of the largest economies in the world. This phenomenal shift in investment allocation has happened countless of times. But exactly why does it happen? And how can one capitalize on this periodic change in polarity?

As investors were anticipating a slowdown in US economic growth recently, demand for safe havens increased across global markets. This quickly boosted gold prices and has helped the product make a new 3-month high. The precious metal was able to rally 4.1 percent just last week.

After taking the steepest dive since 1981, gold prices continue to show positive signs of recovery and stabilization. This noteworthy sign of recovery came subsequently with soft US economic data last week. At the start of the week, bullion orders jumped 1 percent to $1,331.50 during the afternoon trading hours on the New York Mercantile Exchange.

Juxtaposed the US economy’s lost of growth momentum, Japanese Yen also slips as Bank of Japan statement and other economic indicators were released. The yen weakened across the board, especially against majority of its currency counterparts in the Forex market. On the other hand, Bank of Japan’s two-day meeting concluded with the central bank deciding to keep rates unchanged.

Now, how do investors capitalize on gold demand? The simplest investment approach would be to purchase or add more gold to your existing investment portfolio. Be sure to get in at a price retracement for the lowest risk and highest reward possible.

In addition, you can buy Australian dollar and New Zealand dollar, which is positively correlated with gold. This means that if gold prices increase, so do these currencies. The reason behind this is the fact that Australia and New Zealand are two of the largest gold suppliers in the world. Increase in demand for gold means more money for these countries.