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Why is the Price of Gold Increasing?
 Halina Zakowicz
The price of gold has been increasing steadily since 2001, due in large part to the continuing devaluation of the American dollar. In other words, the continual influx of newly-minted dollars has resulted in more dollars being required to purchase the same amount of gold. Compared to 2001, when the gold price was under $300 per troy ounce, it is currently almost $1,600 per ounce. The gold price topped out at $1889.70 in August 2011 and, according to some estimates, will soon surpass $2,000 per ounce.
The advantages of owning gold are numerous. Gold is recognized as a universal currency; it is more resistant to disasters such as fire and flood; and it is available in limited quantity. In contrast, money is typically recognized as valid currency in only one country – and that currency becomes meaningless if the issuing country dissolves. Likewise, money can be destroyed by fire or become moldy and defaced by flood. Finally, because money can be created "out of thin air" through government fiat, the value of that money is likely to depreciate over time.
Until 1971, the economy of the United States was based on the gold standard. Once that standard was abolished, inflation resulted. Since paper money could be printed at will and was no longer tied to a given amount of gold, the U.S. economy quickly became inundated with more and more dollars that were worth less and less.
Thanks in large part to the destabilization of several national economies, the ongoing recession in the U.S., and the continual printing of American dollars, it is little wonder that the gold price has increased over 5 times in the last 10 years. It is also little wonder that some experts estimate the value of gold to increase to as much as $5,000 per ounce should the U.S. economy continue to struggle.
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