Gold is the currency of the world because it sets the standard. However, it often is based on the U.S. dollar, and the value fluctuates as with any currency though far less drastically than any other form of currency. The reasons behind gold’s up and down worth is also dependent on global activity, both positive and negative.
5 Factors Which Can Affect the Price of Gold:
1. Worldwide Crisis:
Gold price rises when people become uncomfortable with the market or lose trust in their government. Gold is a safe commodity that survives wars as well as countries’ upheavals. The trick is to understand when gold price changes and in particular, when they will soften rather than spike because many will rush to invest in gold if a disaster happens or is in the foreseeable future forcing the price up.
2. Interest in the Interest Rate:
Gold is a metal. Metal holds no interest rate so in having and storing gold, you are not garnering interest on your investment. However, that is the beauty of having gold stashed for hard times. Gold is a liquid asset that can be sold in cases of emergency or to invest elsewhere.
When interest rates are low is the best time to secure your gold investment.
3. Government Reserves Not Being Reserved:
France, The United States, Germany, Italy, and Portugal have possession of the bulk of gold in government reserves. Paper currency, as well as gold, are held until they are released. However, when the stable, central banks begin to buy gold in bulk, the price sky-rockets. Gold then becomes harder to obtain for regular people because it goes into already established reserves.
4. Supply and Demand in Industry:
Many people see gold as merely a metal to be used in jewelry or household items while others see a currency for future use. However, regions in India continue to use gold as their only monetary exchange method, and the effect drives the price of gold upwards. Gold has also become the symbol of wealth and success in China which leads to higher gold prices.
When not being used in jewelry or as currency, industry uses gold to engineer everything from appliances to medical devices. You have to know when the right time is to purchase gold as your stash at a flat rate rather than when it is at its height.
5. Making the Gold:
Approximately 2,500 metric tons of gold are produced annually with 165,000 tons currently in the Global reserves and supply. While it may seem it would pay off itself in dividends, the production of gold has a cost that may cause the price to rise.
When creation costs rise, mineworkers pitch gold for more to protect their bottom line. Expenses are reflected when it comes time to sell minted coins stamped from gold whether it was initially mined yesterday or a hundred years ago. The price of gold takes an upward slide when it happens.
Gold price is dependent on production costs, geopolitical strength, jewelry and industry, and most of all, the Central Banks. Gold is a limited asset and when it is in demand the price rises. The value of gold is steady, though, and does not fluctuate as drastically as most investments do.
Research on the gold market and perhaps meeting with a financial adviser is never a bad idea. Knowing what you are getting into is better than investing at the wrong time. You want the best information when you are planning your financial future.
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