Investing in gold is a very smart decision and there are various reasons why. Not only does it allow you to diversify your financial portfolio but it also has quite the market given that there has been a drastic increase in the demand for precious metals in the jewelry market. Gold is a reliable and steady resource to invest in since the chance of it being counterfeit or overproduced are very slim. In order to produce pure gold weighing approximately a golf-ball sized sphere, you would need to move 9.4 tons of earth on average. This explains why the spot price of gold remains as high as it is.
The gold spot price can be defined as the current price of raw gold per ounce before incorporating any gold dealer premiums or taxes. This very price is determined by some global factors and is the same no matter one’s location around the world. Trading in gold requires you to have accurate information on these price changes in real-time.it is also advisable that you examine historical data regarding gold, going back about 30 years in order to gain specific insights into changes in gold trends and prices in the long term. You can sign-up for alerts. For instance, you can set your ideal gold spot price per ounce and once the price has reached your target, you will get a notification via email/ text from a tracking software from a website of your choice. Familiarize yourself more on this by visiting gold spot price.
The gold spot price is usually closely monitored in order to prevent anybody from buying this precious gem in one part of the world and selling it with a different price in another area of the world. The price of gold is affected by certain global factors. Let us have a quick peek at some of them:
- Demand for gold especially in the jewelry industry
- Currency valuation- USD
- Uncertainty and protection against volatility
let us now have a look at each of these factors expounding each one by one.
Demand for gold especially in the jewelry industry
Undoubtedly, gold is among the most common precious metals that is usually sort after for bracelets, rings and many other pieces of jewelry. The jewelry market is one market that has continuously grown and so has the demand for gold. For instance, gold in India is highly linked to tradition, culture, desire for financial protection and the overall desire for beauty. Research shows that Indian consumers perceive gold as both as an adornment and investment. When asked why they didn’t mind buying gold, more than 75 percent of the investors who responded stated that gold is a safe investment and another good number said that there is no other form of adornment that beats gold. The tremendous growth in the jewelry industry has led to increased demand for gold which translates to a higher gold spot price. Read more on the Indian gold market by visiting gold prices.
Currency valuation- USD
When the value of the USD goes up, the gold spot price goes down; when the USD value goes down, the gold spot price goes up in contrast. For instance, in China, the demand for gold increased considerably when the Yen’s value solidified in value compared to the USD. Normally, the dollar value and gold price share an inverse relationship. International gold is denominated in US dollars, therefore any weakness in the dollar will push the gold prices up and vice versa. When the value of the dollar falls, it increases the value of the currencies of those other countries which in turn leads to increased demand for other commodities including gold. The prices of these goods will also go up. Also, when the USD begins to lose its value, investors will tend to look for alternative sources of investment in order to keep value and gold is one such alternative. This basically explains the inverse relationship between currency and gold spot price.
Uncertainty and protection against volatility-
Uncertainty can majorly influence the gold spot price. One good example of a situation of uncertainty is political instability. Simply put the stock market craves certainty as such, any factor that can contribute to global uncertainty growth will lead to increased gold prices. Normally, people invest in order to protect themselves against uncertainty and volatility. The preference for physical market, as opposed to the stock market, makes gold a better go to when all other assets seem to be losing value. Investing in gold more often than not works out better for most investors and they would buy it for both good times and bad times despite whether or not the economy is in recession.
Inflation or rather the rise in the price of goods and services is a major factor that can affect gold spot prices. High inflation levels tend to push the prices of gold upwards whereas deflation pushes the prices of gold down. Inflation in most cases is usually a sign of economic growth and expansion. With this, most governments tens to increase the money supply. This move leads to a dilution of the value of the currency in circulation. The decreased value, on the other hand, makes buying assets such as gold more expensive. Although not guaranteed, inflation and interest rates have a lot to do with the gold spot price. Read more here.
Diversifying your investments is one way to ensure higher returns and being part of the gold industry is one such way to go. Most of the times, when traditional stocks drop in value at a faster rate than an investor can sell them, the price of gold tends to rise. Following a market crash, investors act by pushing their currency into forms of assets like precious metals. Having good knowledge of how the world of gold investments and what affects the prices of gold will ensure that you stand a better chance of being a successful investor.