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Will Gold Prices Benefit From the Current Global Uncertainty?

Will Gold Prices Benefit From the Current Global Uncertainty?
Gold prices_0612

The growing risk of stagflation where economies struggle with stagnant economic growth and rising inflation is expected to drive gold prices higher, according to Dr. Alan Greenspan, the former Federal Reserve Chairman (1987 – 2006) said in the latest World Gold Council’s February 2017 Winter report.

The former Fed chair believes that given the risks of stagflation and the current political uncertainty across the globe, investors will seek safety in the precious metal as insurance for long-term protection and not for short term gains. This was evident from the fact that global demand for gold rose 2% in 2016 to 4,309 tonnes, which the World Gold Council puts it at the highest level since 2013.

Dr. Alan Greenspan further adds that from the U.S. as inflationary pressures growth, the price of gold will also start increase, calling gold as the “primary global currency.” Highlighting the risks of stagflation, Dr. Greenspan said that the 1970’s stagflation in the U.S. which saw interest rates being quickly hiked to 20% resulting in a lot of imbalances.

Most of the gains in gold came from fund inflows into gold backed Exchange Traded Funds (ETFs) which accounted for 532 tonnes, marking a second highest year on record.

Last year was marked by political turbulence and the rise of populist and nationalistic political parties and leaders. What was thought unthinkable happened as the UK decided to part ways with the EU and the U.S. elected president Trump who has vowed to put “America First” in a bid to pursue protectionist policies and threaten global trade.

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Wednesday, 22 Feb, 2017 / 9:28

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