Gold fast losing it’s commodity character

Gold is fast losing it’s commodity character and is acting more as a currency which is not so good for global economy.

Gold is fast losing it’s commodity character and is acting more as a currency which is not so good for global economy, analysts said.

Many analysts are of the view that gold is currently behaving like a currency and it is very difficult to predict how its commodity character will change in the long term.

Gold prices act as good proxy to lack of confidence in the fiat currencies. The crisis which started with companies being under financial stress has now moved on to countries.

Gold acts as a hedge for investors in such times. If one believed that the future is bright, businesses will pick up and the real interest rates will turn positive, would one still buy gold? The answer would be no.

But in the current market environment where the US, the world’s largest economy, is running at more than 100% debt-to-GDP ratio and Europe is struggling to keep its union up and running, we can be reasonably comfortable in believing that good times are farther than they appear. Till then, have faith in gold!

Many experts believe rising prices of gold are caused by the problems of global economy, and that is why no one can say exactly when and how this tendency will change.

As a result, gold buyers try to avoid paying a lot of money for something whose value may drastically change in the near future.

Gold continues to remain in a primary bull market since the last decade. History has shown that commodity prices move in cycles of 16-17 years which might mean four-five more years of gold bull market yet to capture.

One also should not forget that corrections in bull markets of around 30% are a normal occurrence and have been observed in the past.

Investors need to be aware that the last leg of any bull market is often the most profitable and the most volatile. Hence, one should periodically use corrections as opportunities and gain from investing in gold.