The latest quantitative easing by the Fed saw a spike in gold prices, but it was brief and was quickly met by selling pressure. Even the anxiety over the US budget failed to revive much interest in the commodity unlike previous times. In fact gold has recently touched a 6 month low at the start of the New Year. So the prospect for gold going higher has never been as weak as now.

The major factor that had been driving gold prices higher over the last couple of years has been the Federal Reserve and its record low interest rates, quantitative easing and struggling economies on both sides of the Atlantic. But with no QE3 and higher interest rates before late 2014, gold’s upward movement seems to be limited. Even the troubles in Europe seem to be waning which doesn’t help gold much.

If the factors that were propelling gold to new highs were to happen again, the precious metal could well get back on its track to newer highs. These factors include a weaker American economy, trouble in Europe and unrest in the Middle East. More specifically, anything that weakens the dollar such as a weaker interest rate or quantitative easing is beneficial to gold. Likewise, the factor that creates panic among the general masses also contributes to gold prices. These factors might be unrest in the Middle East or Europe resulting from conflicts, austerity measures etc.

If none of these things were to happen in the future and we appear to live in a picture perfect world, gold doesn’t seem to be the best investment option. A better alternative to investment in a picture perfect world would be its sibling, silver. Copper or any other precious metals would also fare well. This is because, if the economy recuperates and there is expansion in manufacturing and expansion activities, use of precious metals such as silver and platinum as well as industrial metals such as copper would increasing, thereby raising its demand and eventually prices.

Note: This blog is just an expression of the author’s opinion and cannot be deemed responsible for any losses incurred.