Universally, gold is used as standard of value for
currencies; in like manner the price of gold is usually expressed in US
dollars. There may be slight fluctuation in the price of gold premised upon the
market conditions and the highlighted cogent issues/determinants. http://bit.ly/2qlYERz
1. Demand and supply. As
you are fully aware that the supply of gold scarce and finite. Therefore, the
cost of mining gold and precious metals are not cheap, geopolitical instability
and unfavourable action of central banks tends toward inflation. Furthermore,
the high demand and activities of jewelry and ancillary products manufacturers
imparts positively by pushing the price of gold upwards. So the law of demand
and supply in reality, the lower the supply, the higher the demand and the
greater the price.
2. The cost of gold production. Based
on available data, about 2, 500 metric tons of gold is mined annually and
yearly production cost is not static but rather increasing. The aftermath is
the reflection of this cost in the price of buying and selling of gold. http://bit.ly/2sm7mk1
3. Jewelry and ancillary products
manufacturers. Gold is a hedge fund and safe haven
investment against inflation, based on this fact, there are heavy demand from
countries like USA, China, India etc. Assuredly, in these countries, large
quality and quantity of gold is used for manufacturing jewelries and components
of electronic equipment. The high demand for gold brings about increase in the
price of gold.
4. The worth of US dollars.
The USD is highly prominent among the currencies of nations and of course the
most acceptable currency for international trade. In fact, the price of gold is
negatively correlated with the strength of the USD, when the value of gold is
stronger, that of USD is weaker and people used to capitalize on stronger USD
as avenue of buying more gold.
5. War and other global crisis. Gold
is termed crisis commodity borne on
the fact that price of gold usually increased during geopolitical instability
and war. During this situation, there will be “gold rush” as people lack
confidence in the prevailing economic scenario and gold is the only safe haven
as assured assets. http://bit.ly/2r9IRt1
Take for instance, during the
geopolitical instability in Russia, there was spike in gold price as the
Russians were moving to Ukraine.
6. Unstable monetary policies of central
banks. All the nations of the world have their respective
central bank that regulates their economic policies. For instance, the Federal
Reserve Bank of USA, European Central Bank, Bank of Japan, Swiss National Bank
etc.
Any unfavourable monetary policies that
imparts negatively on paper currency will lead to gold rush been a safe haven
and most preferable physical and tangible assets. The increase in the demand
for gold will lead to hike in the price of gold.
7. Inflation. The
consequence of unstable monetary policies is inflation and devaluation of
currencies. As the currency value fluctuates and eroded, savvy people invest
heavily on gold as hedge or insurance against inflation. The good aspect is
that gold is valued worldwide and outside the control of any monetary policy.
http://bit.ly/2r9IRt1
8. Interest rate. Gold
bullion is not subject to interest rate but the increase or decrease in
interest rate usually reflect in the demand for and price of gold. When
interest rate is increased, investors’ sells gold to raise money for other investment
and during the period of decreased interest rate, gold actually experienced a
boom market in form of “gold rush”.
9. Government reserve. Governments
of nations through their Central bank
have standard practice of keeping a national reserve in form of gold and paper currency.
The Federal Reserve of USA, France, Germany, Portugal etc is practical
examples. When these countries begin to invest heavily on gold, the price will spike.
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10. QE.
Quantitative easing is a strategy used by the central banks to ease the flow of
money into the economy. These pinnacle banks like Federal Reserve of USA, Bank
of England, Bank of Japan etc; will mop-up (buy) the securities from the
financial market and money available to commercial banks to lend to the people.
This enormous supply money will push interest rate downward; the low interest
rate will propel investors to buy gold by all means.
In view of the above, l hope these
revelation will be of tremendous benefit when you are making your next purchase
of gold bullion. Kindly visit this blog and link (http://bit.ly/2qlYERz)
regularly for valuable information and tactics on gold bullion.
