Wednesday 28 November 2012

What Makes the Gold Price Increase?

Increase in Gold Prices
Investors, non-investors and the government have always considered gold precious eversince. Among other commodities, the price of gold has always been doing well and has had a greater value compared to other commodities. Why is this so? Let us consider the following reasons.

World Inflation

The inflation all around the world is one of the causes of the high price of gold. Gold cannot be separated from the world economic crisis. Thus, the decreasing value of the dollar is not the sole reason for the high price of gold. As the inflation increases, the faith of people in their economies decreases resulting in their lack of faith in the value of their currency too. That is why when this happens, they resort to investing in gold. Experts claim that gold prices have started increasing since the year 1972 during the so-called US Gold Standard that the then President Nixon abolished. Gold was then sold to the citizens while the US government gained profit from it.

Limited Supply of Gold

Gold is primarily found in India, the USA, Australia, South Africa, China, Canada, New Zealand, etc. The rise in the demand for gold resulted in the scarcity of its supply in mines. In fact, one major gold mine at Kolar in India is now gone due to its depletion in gold supply. There may seem to be enough supply of gold around the world, but the truth is, the gold supply is depleting. As its supply becomes limited, its price continues to rise based on the Law of Supply and Demand.

Greater Demand

The demand for gold is forever rising. Experts especially say that a high percentage of gold amounting to 75% is used for making gold jewelry, gold bullion as well as for medical puposes. Only 25% is used as an investment. Demand for gold is the greatest in India followed by the US.

Gold Market Predictions

When we speak of bulls market, the gold comes first since each day its price rises. The gold market is the game of hedge groups and speculators who try to make gains out of gold speculation. This results in the price of gold to rise. When it is speculated that there is a fluctuation in the gold rate, small-time  gold buyers worry about the rate of gold. To avoid losses from future speculated gold price, they start acquiring gold at an impulse. This aids in further gains on the side of the speculators yet this results in gold price hike.

Political and Economic Turmoil

Political and economic turmoil is not new to the world since it has been through World War I and World War II. During those times, the US government implemented a ban on hoarding gold since people preferred keeping gold nuggets instead of paper currency.

There is a tendency for the price of gold to keep rising. Since 2001, the price of gold has been rising quite fast. There is no speculation yet that it will stop rising unless more gold will be discovered in unexplored places on Earth making it a commonplace thing.   

13 comments:

  1. Hold capital in Physical gold is reassuring especially in troubled economic times when the value of other traditional investments may be diminished or even nullified. Placement all the more interesting that its cost is small compared to the overall profitability of the portfolio

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  2. Indeed gold's price is increasing now a days because of the benefits and security it offers one against the economic ups and downs. Gold gives us a stable platform, protecting our precious wealth and monetary resources from the economic fluctuations. the decreased production and increased demand makes the prices higher. Since 2001 gold has been rising quite fast. The precarious situation of the world so the tendency of people to buy gold is increasing day by day, thus contributing to the increase in the prices of the gold . We should seek opportunities to buy cheaper gold today for it will bring us greater profits tomorrow.

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  3. "I have never really understood the human affinity for precious metals. It seems strange to me that we would bleed our mother for simple vain decoration. Coal (Which I loathe) I at least understand."

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  4. At this current financial era, for the last few decades, there have been two major things to control the whole world economy. Those are the Dollars and the Gold. These two have been considered as the parameter of calculating one country’s national reserve. But for the last decade, dollar looses it appealing to the controlling over the economy and the place had been taken by the gold. So, this is may be one of that causes for which the price of the gold has been increased at this tremendous rate.

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  5. I have also been confused as I was never a fan of gold, diamond perhaps is something that I adore, but gold not. Then I was able to understand how valuable gold really was and even some other countries fight for it at any cost. It sure is a good investment, and I was amazed how even below the sea you can find gold.

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  6. Gold is considered by its fans to be the ultimate store of value - an asset with no liabilities attached to it. The price of gold rises when an increasing number of investors lose confidence in paper assets, particularly currencies. As such, gold can be seen as barometer of confidence in the ability of central bankers to pursue sensible policies, or in governments being fiscally responsible.

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  7. With an increase of over 565% over the past 11 years, gold is on its way to register new positive developments as central banks are preparing to confront a wave of inflation. Significant loss of purchasing power of the dollar strengthens the theory that gold is in fact the real currency.

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  8. I have seen many people debate whether gold is a bet on inflation or deflation. As I see it, it is neither. Gold does well when monetary and fiscal policies are poor and does poorly when they appear sensible.

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  9. first i would like to say i am really fan of gold and all about it's new , gold is the main thin after gas which i think it control about the economic in any country most countries fight about it . gold is really girt from our god we should keep it .

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  10. The price of gold increased almost double for the last 7 years or so. For example in 2005 the final price was 25 EUR per gram and now it's close to 50 EUR per gram!!!!

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  11. Since there have been no more new discoveries concerning gold, there is still scarcity in its supply which results in its continued increase in prices. This is a guarantee that gold investment can be a lucrative investment. Therefore, it is a wise decision to buy gold as soon as you can even though its price may be expensive now since its price continues to increase over time, so in the long run you will profit from it.

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  12. Gold’s demand would not anytime diminish both for its illuminated aesthetic beauty and for the economic value attached to it. There are a few countries where gold mines are found. However the mines are very limited, as the years are passing the scarcity of gold is going high. Moreover everyone is realizing the fact that the price of the gold would never go down whereas the value of dollar is going down along with the diminishing market. The knowledgeable writer has made us understood the causes of the price booing of gold into the market. The causes that the writer has mentioned e.i. “world Inflation Limited, Supply of Gold, Greater Demand, Gold Market Predictions, Political and Economic Turmoil”. I would not explain the points, I appreciate the article that there are enough explanations to comprehend the reason of going the price of gold high.

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  13. The price of gold went down in April of this year. However, it is back going up this month. I really think now is the time to buy physical gold and other gold jewellery. Why? Because we can always sell our gold pieces to gold buying companies like http://www.GoldBuyersMelbourne.com.au in the future when we are in dire need.

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