Investing in gold. Factors influencing the price of gold

Understanding the factors that affect the price of gold is important before investing in precious metals. It is equally important to be aware of the major differences between gold supply and demand compared to other investments, such as commodities, stocks, and bonds.

Another factor to keep in mind. Gold is not the only precious metal to consider when making this type of investment. Silver, Platinum և Palladium are also in high demand as an investment offering gold-like bases, but each has its own unique characteristics as an investment.

Factors influencing the price of gold bars

The value of gold coins or gold bars is contained in the precious metal content. While gold looks beautiful on almost any horse when looking for investment purposes, its aesthetic appeal is usually overlooked. Because of this, the value of gold bars is directly related to the market price of gold; fluctuations, such as stocks, bonds, and commodities, fluctuate with market movements.

How to measure the price of gold?

Most business reports will show the price per troy ounce in US dollars when quoting gold. If you’re looking for a market outside the US, be sure to convert this price to your base currency; know that one troy ounce equals about 31.1 grams.

Keep in mind that the market price is always for pure gold. Most jewelry is much less clean (usually 40-75%), but bars and coins, however, are usually quite clean (over 90%).

Understanding the underlying mechanism of the price of a physical gold sample, you can begin to look at the market forces that cause large daily price fluctuations. They are listed according to their effect on the daily price of gold.

1. Macroeconomic data

The most influential indicator of the price of gold is the daily economic information coming from the world markets. Gold has historically been a safe haven for investment. Like real estate և cash, it’s the place to put your money if all else fails. When money is taken out of the stock market, it mainly flows to this type of investment, but in 2008, when the stock market (the real estate market fell at the same time, gold seemed to be the only safe game), in turn, began its dramatic gains. in the price.

2. Inflation pressure

Inflation is the theory that over time, the value of money will always decrease as prices rise. Although the average price of a house is not $ 40,000, as it was in 1975, the number of gold bars that will be required to buy the same house is quite consistent. Gold, valued at $ 40,000 in 1975, is now worth just over $ 310,000.

This means that no matter what the gold market is, in the long run it is always better than keeping cash without earning any interest on it. If gold does not pay interest, its price generally lags behind inflation rates or better.

3. Gold supply և demand

Supply – the demand for most products – is the main driver of market pricing. Although the price of gold is much more complicated than this basic formula, these factors really do work.

The supply of gold is highly dependent on its price, as the cost of extracting it has become very high. In the past, it was quite easy to search for gold գտնել to find a mine, with many stories of gold rushing to mainland. Nowadays it is much more difficult to extract a large amount of gold և requires expensive equipment և technologies. Also, because gold is not really “consumed” or not consumed the way other commodities do, there is always a large supply of gold, regardless of supply. Thus, unlike most other commodities, gold supply is likely to respond more to its price than to directly affect it.

The demand side is just as backward. As the price of gold falls, so does the demand for jewelry (as jewelry is a discretionary item), but the investment demand for gold will generally decline as prices move downward. The opposite is true, of course, if prices rise. The demand for jewelry gold is declining and the demand for investment is increasing.

The future of gold prices

Consider the economy և inflation rates as the most likely indicators of the price of gold in the future. Another big drop or a sudden rise in inflation can lead to a new big rise in gold. Similarly, if things continue to improve in the world economy, և inflation stays under control, gold prices are likely to remain quite stagnant և they may fall even slightly.