How the Fiscal Cliff May Affect the Price of Gold

In the days immediately following the 2012 election, the impending potential ‘fiscal cliff’ has been dominating the news with citizens’ concerns about the implications for their daily lives as well as the impacts that it is having on investment markets.

What is the fiscal cliff?

Beginning in January 2013, there are a number of government spending programs as well as various tax cuts that are set to expire. Congress and the president have thus far been unable to come to an agreement about how to alleviate the problems associated with the impending cliff. Currently, the two catalysts – the spending cuts and tax increases – are worth an estimated $607 billion.

How will the fiscal cliff affect the stock market?

As business owners are preparing for the impending tax hike and decreased spending, the market is quickly falling. When businesses have less money to spend, they naturally produce less and have lower incomes. This in turn causes the investors to get nervous and market prices drop.

What is the projection for gold prices with the impending fiscal cliff?

Unlike most other metals, which are projected to drop with the rest of the market, some financial analysts expect gold prices to do fine. This is most likely because gold is viewed by many as a safety net. When the currency is doing poorly or other markets are not doing well, gold is a constant. It will maintain its value even when the global markets go down. This reputation just may be what saves gold from the fiscal cliff.

In these times of financial uncertainty, many people are looking for investments that will be constant and safe. Gold’s reputation to be that investment is drawing many people in and keeping the price of gold high even as other metals fall.

Jessica B for Raymond Lee Jewelers, South Florida’s premiere source for buying and selling luxury watches and designer jewelry.

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