Gold is a commodity and therefore is driven by supply and
demand as well as speculation. Unlike most other commodities, saving and
disposal plays a larger role in affecting its price than its consumption.
Almost all the gold ever mined still exists in forms such as bullion and
jewelry.
Central banks and the International Monetary Fund play an
important role in the gold price because they hold 19 percent of all the above
ground gold as official gold reserves. Any real or speculative moves by these
institutions affect the gold selling price dramatically.
Gold, like all precious metals, may be used as a hedge
against inflation, deflation and currency devaluation. If the return on bonds,
equities and real estate do not compensate for risk and inflation then the
demand for gold and other precious metal investments increases.
Gold jewelry accounts for over 2/3rds of annual demand and
India is the largest consumer in volume at 27% followed by China and the USA.
Industrial, dental and medicinal uses account for 12% of gold demand.
In closing, the demand and speculation are the driving force
affecting the gold selling price.
By, Kevin Robbins
No comments:
Post a Comment