All that glitters is not gold

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According to the latest quote from Nasdaq, Gold is currently selling at 1231 dollars per ounce. Just last week it was priced above 1240 dollars per ounce, which is a year-high. So why has consumer interest peaked for this precious metal?

Gold has been used by investors as a hedge against systemic risk in the global market because the commodity is perceived to be a safe haven for value. The slowdown of the Chinese economy and negative interest rates from central banks are just two of the many risks that pose serious concerns to investors. In light of these instabilities, consumers and fund managers alike have opted to store their money away in gold, which is detached from these risks, to provide balance to their portfolios. While gold does not promise high yields, it does provide stability throughout market turbulence.

According to a report from The Economist, drooping oil prices have contributed to gold’s high price. By stoking fears of a deflationary trap, low crude prices have led central banks into negative interest rate territory, which makes gold look like a more attractive investment compared to government bonds. Additionally, things look bright for gold on the supply side. The World Gold Council released a report on February 11 stating that mining in the fourth quarter of 2015 dipped by 3 percent. With high demand and low supply, basic economics would indicate that gold prices can be expected to continue to rise.

Gold was once viewed as such a reliable source of monetary worth that the United States, Britain, France and many other countries directly linked their own currency to the value of gold. These countries do still hold significant gold reserves, but the commodity plays a lesser role in the global financial markets than it once did.