Trends in the gold price are affected by such factors as monetary policy, supply and demand, and social instability.The gold price is driven by many factors, such as central bank monetary policies, supply and demand, and social upheaval. Though changes in these factors may cause the gold price to fluctuate in the short term, over the long term the gold price generally moves up and tracks inflation.
The global currency wars have added enormous volatility to the gold price that was absent in previous eras. Today, nations are debasing their currencies in the hopes of making their exports cheaper and thus more attractive to foreign consumers, as well as to make their debts easier to service. However, the debasement of currency has the unintended effect of raising the prices of goods, especially from abroad. Consumers of nations that heavily depend on importing basic commodities such as oil and agricultural products tend to be adversely affected with high inflation when their currency is debased. Because of the intrinsic value of gold, it tends to appreciate in price when currencies fall.
Since the start of the global currency wars around 2010, central banks have been net buyers of gold. Purchasing gold adds prestige to a nation, and, hence, its currency. Because gold trades inversely to paper currencies, gold provides a hedge to risk for central banks around the world.
The gold price is also affected by supply and demand. The supply of gold increases about one to two percent annually due to mining, thus allowing gold to maintain its value relative to other goods. Unlike paper currencies, gold cannot be produced with a printing press and handed out at will. This scarcity of the metal has been a crucial factor in making it one of the most popular investments historically.
Over time, the quality of the ore from which gold is extracted tends to decrease, forcing gold miners to invest in exploration for new sources of gold. However, the general decrease in the gold price in recent years has driven away investors and capital, which has prevented the discovery of new mines. As the current sources of gold become depleted, demand is likely to outstrip supply, causing the gold price to rise measurably.
Political and social instability have also played a key role in influencing the gold price. As the risk of war increases among nations, the gold price will tend to appreciate, since wars are costly and usually create budget deficits. Political tensions within nations, such as in Greece and other peripheral nations of Europe, increase the risk of a default on sovereign debt, since radical parties may not agree to the terms of financing of the sovereign debt. As the risk of default increases, the gold price may rise due to investors seeking a safe haven.
Despite all of these factors, the gold price invariably moves up in the long run. Investors can take advantage of the long-term uptrend of gold by purchasing from Bullion India. Bullion India offers wholesale prices for gold, giving investors significant savings. With Bullion India, customers can choose to store their gold safely in a vault or can take physical delivery of the metal.
mso-bidi-font-weight: bold’>Since the start of the global currency wars around 2010, central banks have been net buyers of gold. Purchasing gold adds prestige to a nation, and, hence, its currency. Because gold trades inversely to paper currencies, gold provides a hedge to risk for central banks around the world.
The gold price is also affected by supply and demand. The supply of gold increases about one to two percent annually due to mining, thus allowing gold to maintain its value relative to other goods. Unlike paper currencies, gold cannot be produced with a printing press and handed out at will. This scarcity of the metal has been a crucial factor in making it one of the most popular investments historically.Over time, the quality of the ore from which gold is extracted tends to decrease, forcing gold miners to invest in exploration for new sources of gold. However, the general decrease in the gold price in recent years has driven away investors and capital, which has prevented the discovery of new mines. As the current sources of gold become depleted, demand is likely to outstrip supply, causing the gold price to rise measurably.
The gold price in India is also affected by supply and demand.