Issues effecting gold rates
One of the Initial metals that humans were benefited from is gold. Since prehistoric times it remains one of the most valued metals. One of the basic factors in deciding the global economy is gold. The price of gold is the major indicator of the status of the global economy. There are several factors that affect gold prices, a few of them are:
1. Gold production
Due to the rising cost of production in mining of gold, frequent strikes by the miners, declining political situation, sudden rise in the oil prices after the Iraq war, a reduction in the gold production has been noticed in the last five years. The world population is increasing everyday and with it is the demand of investment in the gold bars. Since ages, man always has believed to invest in bullion and they hoard gold for a good period of time which also affects the gold prices.
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2. Value of US Dollar
The key factor that decides the price of gold is the value of US dollar . The cost of the gold will be less and controllable if the US dollar is stronger. A weak dollar will force the price up of the gold to new high. US economy plays a crucial role in determining the macroeconomics of the world. People invest, buy and deal in dollars when it is performing strongly. Recently, Us economy was badly hit which effected the dollar prices. For this reason, nations and people started investing in bullions. If a country has high reserves of gold then it gives a boost to the economy and acts as an hedge for inflation.
3. Demand for gold by the Chinese and Asian market
The chief buyer of gold bars for the jewelry markets is China and market. Recently Chinese citizens were allowed to have ingots for the first time in history. This generated a high demand of bullion, which consequently affected the price of bullion throughout the world. In 2009, there was a decline in the demand of the gold due to the recession, which affected the gold price.
4. Reserves of central bank
Central banks keep ingot reserves which cancels out the effect of inflation. The other factor that affects the prices of the gold is the monetary policies of the central banks. The thing that discourages people from investing in paper money is the low rate of interest rate of the bank; after that they invest in gold, so that they get a good return. If the central banks offer high interest rates, there are chances that the rates of ingot will come down.
5. Rising investment in gold
In the past decades, each time the dollar performed badly, they started investing in gold funds or gold coins. Bullion is surely going to give them more value than anything else and this is what multiplies the demand in gold.
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