How the Rising Price of Gold Predicts Continued Economic Turmoil
The recent volatility in stock markets of both the United States and of the European Union underscore how terrifyingly fragile the world economy is right now. By some miracle, inflation has remained somewhat steady, but it is only a matter of time before rising prices strike at the heart of any nascent recovery. In times like these, it is little surprise to see the rise in gold prices that have dominated the investment headlines over the past few weeks. Investors of all stripes are desperately attempting to halt the hemorrhaging value of their portfolios amid the ravages of the stock market.
Here are a few things that the price of gold reveals about the condition of the overall economy.
Paper Currencies Are Losing Value
One of the primary things that high gold prices mean is that the paper currencies of the world’s economies are in serious trouble. Insolvency lurks behind the walls of nearly every central bank right now, and there is a chance that many more countries will unwillingly follow in the footsteps of Greece and Iceland.
The World Exchanges Are In an Extreme Bear Market
Despite what many of the investment experts have declared during the past 18 months, the recent spike in stock values has not been a sign of a recovering economy. History shows that fast spikes are soon followed by faster drops, a telltale sign that the economies of the world are mired in a bear market on shaky footing.
Gold prices necessarily rise, then, as prescient investors seek safe haven from the ravages of a runaway market. Though day traders can still make a decent profit from going extremely short on certain stocks, in this climate it is an extremely dangerous proposition.
Interest Rates Will Soon Need to Rise
The era of low interest rates is soon to come to end. It has to, for the simple fact that if no one is lending or borrowing anymore, no one is making any kind of money. Rising interest rates are the only hope of spurring on some form of economic activity. With the rise in gold prices indicating that investors are hunkering down, looking to save, the market is craving some form of incentive for them to do so.
High Unemployment Is Here to Stay
Without any capital and with no ability to take on more debt, companies will continue to cut back on their operations and play it safe. This means that unemployment is likely to stay high for the foreseeable future.