Gold is a precious metal with which humans have had a long and well-known relation and this continues each and every day. In a sense, there is a complex and long history about Gold relationship with mankind. Gold served as money until other forms of currency were discovered and devised. It has been a hot investment for many decades. The distinctive high Gold value makes it one of the reliable and precious forms of wealth, regardless of the economic conditions.
For many years the value of Gold has been fluctuating. For this reason, investors looking forward into investing in Gold need to keep a close watch on the value of this precious metal. There are a number of factors that contribute to the changes in Gold value or prices. These include;
- Supply and demand- This is true when it comes to any valuable commodity in the market. If the prices of Gold increase in the markets suddenly the supply cannot meet the demand and it value will increase. On the same note, if production of Gold is affected by a miners’ strike and supply falls, this will also push the prices to increase. This means that demand of Gold has a much larger impact on Gold value than supply of the precious metal does.
- State of Economy- The state of global economy has great influence on the value of Gold. Whenever the economic situation in countries that offer these precious metal is weak with most of the investments providing low returns, more investors are likely to go into the field and put their money on Gold.
- Strength of the dollar- If the dollar [global trading currency] weakens, many investors around the world will begin to sell the currency and buy Gold for security. This also increases demand, and as a result rises in Gold value. On the other hand, when the dollar strengthens, it also leads to fall in demand of Gold.
- Policies of central bank and mining companies- For many years, central banks in emerging markets relied on buying US treasuries. Nevertheless, with higher wage increases, increased inflation and interest rate uniformity, the emerging market currency had depreciated with time. Central banks and mining companies usually hold large reserves of Gold and they buy and sell this metal in regard to the movement of their currency and economic scenario.
- Many uses or practical applications of Gold- Gold is not just a beauty object or monetary value commodity, it has many practical uses in computers dentistry medicine and electronics and much more. When the demand of Gold in these industries fluctuates, the prices of Gold are likely to vary.
Gold prices differ from one country to another. The global prices are fairly constant, but if a country wants to get more, it is also wise to get rid of the large amounts of Gold and post a different price for the global buyers to easily control the market. As an investor, it is wise to also look at factors such as government policies, increase in per capita income, trading and speculation and national emergency situations as they also affect Gold value.
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