Gold is one of the most important bargaining chips that people all over the world use to succeed in their investment plans. Being one of the noble metals that is extremely rare to find on Earth, this metal has always been used as a currency since the old days. The value of gold is quite sporadic, sometimes going up too high while at other times experiencing a low. Currently, in the US market, the value of 1 gram of gold is at 39.66 $. 1233,55 $ is what you will get for an ounce of gold, and 1 kg of this rare earth metal will fetch you a whopping 39659,55 $.
However this price will change pretty soon, as the value of gold continuously increases or decreases depending on various factors in the market. This is not a relatively new situation. The discovery of the vast gold mines in South America of 16th century led to the fall in the price of gold. This relatively influenced the price of other items in the market to go up quite high. Since then on, the problem has changed to be the opposite: the value of gold has been high since the supply of gold is strictly limited. However there are random changes in the numbers. To understand why price of gold fluctuates and how to predict when price will go Up or Down, keep reading the possible reasons covered in this article.
Price manipulation is one of the controversial reason given to explain why the value of gold always suffers in the market. Some like to believe that central governments and banks have done their best in the last 20 years to suppress the true value of gold. While the World Gold council states that the central banks reportedly have 32,000 tonnes of gold, the Gold Anti-Trust Action Committee claims that in reality, central banks have even less than 15,000 tonnes of gold. The rest of the gold has been pushed into the market or even secretly sold so that the value of this rare earth metal would stay relatively lower.
The curves of Demand and Supply are quite strained because gold is limited in amount on Earth. Most of the gold we use is circulated. This further puts a strain on the actual price of gold on a day-to-day basis. Then again, the fact that gold is traded in opposition to the dollar is another factor that leads to fluctuation in the value of gold. Most countries possess gold as a sort of immunity against inflation. The theory stands that if paper currency falls in value, gold will still retain its high purchasing power. If the value of dollar is high, it will make any dollar-backed unit like gold even more expensive. This is why a lot of countries decide to severe their currency from gold standard. This decreases demand of gold and lets its value fluctuate even more.
As far as prediction is concerned, experts believe that the effort made to see if gold prices will increase or decrease is more about the “marketing the prediction” instead of “predicting the market”. One indicator would be the Federal Reserves interest rates. If the rates are high, it will put more pressure on the price of gold throughout the year. Drop in the price of crude oil, the rate of growth of economy in Europe and China are all a part of the data that is collected in order to reach the bigger picture.
Also if there is less inflation, there will be a less amount of demand from all investors who usually buy gold and silver as hedges. As a result, deflation also stands as an indicator if the value of gold will fall or not.
Gold is expected to remain a strong unit of currency. It`s limited supply and continuous re-circulation in the market will deeply impact its value in years to come.