Price of Gold Dot Com

Heed The Warning!

Did you know that the price of gold is up 600% since 2001? Should you heed that as some sort of warning? Sure!

Did you know that powerhouse countries like China and India are buying gold like crazy right now? And did you know that super wealthy individuals from all around the globe are taking similar actions? Could it be that they all know something that the rest of us don’t?

The reason why these savvy nations and savvy entrepreneurs are investing in gold right now is because they realize that there is a pressing need to take action to protect their wealth. So let’s take a look at what might have led them to that conclusion…

What Can We Learn From The Price of Gold?

Since ancient times when there was no fiat currency people have been investing in gold. Of all the precious metals gold is the most widely traded because of its fantastic liquidity. Normally people invest in gold because it acts as a hedge against inflation. Inflation as we know is a situation when the home currency of a country loses its value.

Yes, it is a fact that gold prices go up as inflation goes up and as the value of the US dollar goes down. And when the price rise is steep it’s a good indication that the economy is in trouble. Like now, for instance.

Looking back at how the price of gold began its upward trend we have to go back to 1946. The price was fixed in that year at $35 per troy ounce via the Bretton Woods agreement. This brought in a fair stability to the value of currencies. Inflation too remained under control. This happened because the gold price was fixed.

However that system was discontinued in 1971 when President Nixon put a stop to direct convertibility of the dollar into gold.

Since that decision was taken currencies have become increasingly volatile, and this volatility has increased further because of inflation. The US government is pursuing a policy of issuing additional fiat currency seemingly to arrest inflation but in truth it is actually trying to make repayment of its debt easier.

But the reality is that the debt is now so huge that repayment of it is virtually impossible. Since 1971 the US National debt has surged upwards from 414 billion dollars to 14 trillion, a staggering 3381% increase!

Confidence in the global economy is at a low ebb right now. The high price of gold reflects that. Gold reached a new high of just over $1900 per ounce in August 2011. It then fell back a bit but experts are predicting that its price still has a lot further north to go. Gold charts might be displaying jagged lines but the overriding trend is most definitely upwards.

Options For Investors

Investors have had their fingers burnt with real estate and are becoming increasingly reluctant to speculate on stocks and bonds.

So to tide them over and to protect their wealth many elect to invest in gold because gold acts as a hedge against adverse situations. The worse the prospects, the more people turn to gold by way of a safe haven. And as the demand for gold goes up, so does the price of it.

The simple laws of supply and demand are then at play. And not forgetting of course that gold is a natural and scarce commodity. Governments cannot manufacture it at will just as they can and do print increasing quantities of paper money.

History shows us that gold has a tendency to move in an inverse manner to the dollar. When the dollar goes down, gold becomes more expensive and when the dollar rises gold tends to stay flat or fall in price.

A large number of American consumers are realizing that the buying power of the U.S. dollar is diminishing. And many consider rising prices of essentials like gasoline and central heating to be the cause rather than the dollar itself. They don’t think that it is the dollar which is the primary source of price inflation.

Prospects For The Price of Gold

You may be surprised at what James Turk, Director of the GoldMoney Foundation reports in this video:

With pressure increasing on the dollar its purchasing power is declining and that is determining the gold price. In the current scenario the falling value of the dollar is having a significant influence on the increasing price of gold.

Investors are happy to invest in gold because it is providing them a safe alternative. For them it is an asset that is very liquid and it performs well during inflation. On the other hand government backed paper currencies lose their value (purchasing power) during inflationary times.

One way of looking at it is that the purchasing power of paper currencies is getting eroded because of the price of gold.

It is not just China and India who are buying large quantities of gold right now. A move is being made by the US government too to use the fiat currencies left in the US Treasuries to buy gold and other tangibles. The supply of gold is limited and this increasing demand for it will further push up the price.

According to a recent report published by the World Gold Council gold supply has been falling consecutively year-after-year by 4%. So if supply falls and demand rises then the price naturally goes up.

The Price of Gold and Your Future Prosperity

I started this article with a reference to the steep gold price increases over the past decade. I also made a reference to the fact that governments and hugely wealthy entrepreneurs whose fortunes run into billions are investing in gold in a big way right now despite its high price.

It is evident that they do not view the high price as a deterrent to further investment and conversely they are happy to continue converting many of their other investments and currency reserves into physical gold as a means of protection against the economic uncertainties both prevailing and looming.

The question is, should everyday folk like you and me be taking note of the high price of gold and following their lead?  Most financial consultants and gurus are recommending that you do and that gold is included in your investment / retirement portfolio. The consensus of opinion seems to be that you should convert up to 30 percent of your portfolio into physical gold and to hold onto it for the foreseeable future.

Where To Buy Gold

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The price of gold is indeed trending upwards and in this article we are going to explore the reasons for this and the prospects for this trend continuing.

The Rising Price of Gold

Up until 1970 gold played a central role in global currency systems. However that changed when President Nixon decided to end the system of linking the dollar to gold in 1971.

Then in 1974 the US Congress passed a resolution legalizing gold ownership by citizens of the United States. Before that the gold price had been fixed by the government at 35 dollars per troy ounce but after the passing of that resolution both gold and the dollar began to float.

Rising inflation at the end of the 1970′s  made investors jittery and they resorted to panic buying of gold, mainly because they thought that the ongoing printing of paper currency was getting out of control. (Gold is traditionally seen as a safe haven during times of economic instability). As a result of this panic buying the price of gold began to soar and it hit a new record high of 850 dollars per troy ounce in January 1980. Notably, between 1976 and 1980 gold prices increased by over 750%.

The Federal Reserve System (commonly know as the ‘Fed’ in the United States) increased interest rates during the early part of the 1980s in an effort to cut down the growth of money supply. This move was successful, interest rates then began to decline and there was a marked reduction in inflationary tendencies by 1982.

Investors then turned their focus away from commodities like gold and into stocks instead. As a result the price for gold fell back and settled at around 300 to 400 dollars per troy ounce where it hovered right up until early 2001 when it fell all the way down to 256 dollars per ounce.

However towards the end of 2009 the gold market had become bullish again, pushing the price up to 1140 dollars per ounce (a 445% increase). Many investors at that point began to speculate that gold prices would go beyond 2000 dollars per ounce.

That has yet to be achieved, however the price of gold per ounce did reach a new high of 1911 dollars in August 2011 before falling back.

So as you can see, despite fluctuations along the way, the trend has been upwards since 1971 when the gold standard was removed from the US dollar, During that 40 year period prices have climbed from 35 dollars per ounce to a peak of over 1900 dollars per ounce.

Click on the following link to read more about The Historical Price of Gold

How The Price of Gold Is Determined

Every day the London Gold Pool comprising five members meet to fix the price of gold. This is known as ‘Gold Fixing’’ or the ‘Gold Fix’. Investors can call over the  telephone between 10.30am and 3pm GMT to know the gold price for a particular day. This is how the London Gold Pool settles gold contracts of London gold bullion market members.

The settlements made by this body are used as a benchmark to determine the spot price of gold in the global market.

Factors Responsible For The Upward Trend In Gold Prices

Supply of Gold

A London based independent consultancy and research company named  GFMS (Gold Fields Mineral Services Ltd) which studies the global market of precious metals keeps track of all the gold that is available in different parts of the globe.

A report called Gold Survey is published annually by GFMS. This report carries a comprehensive statistical analysis about the supply of and demand for gold in more than sixty countries worldwide.

As per the most recent estimates made by GFMS the overall volume of global gold stocks stands in the region of 160,000 tons. More than 60% of this stock has been collected through mining since 1950.

The United States with just over 8,133 tons is the largest holder of gold stock. Other large holders include Germany, France, Japan, Italy, China and the IMF (International Monetary Fund). The total worth of gold supply as at the end of November 2009 stood at around $330 billion.

The annual increase in gold stock is usually constant, at around 1.7%. In the last five decades the largest increase was recorded at 2.1% and the smallest at 1.4% (per year).

The critical factor is that inflation increases at a far greater pace than the production of new gold. The long term historic rate of inflation is 4%. The fact that the rate of inflation outstrips the rate of increase in gold stock pushes the price of gold up over time. Hence the upward trend.

The Weakening of The US Dollar

The values of worldwide paper currencies are falling globally because the U.S. dollar is declining in value. There is every possibility that this situation will continue for the foreseeable future because of the ongoing fiscal and monetary interventions of governments and central banks worldwide, including of course in the US.

The value of gold is increasing not only because of the downward trend in the value of the US dollar but also because of the economic crisis that continues to devastate global markets right now. Historically gold prices have always risen in times of economic instability.

Other Factors

Due to the sustained gold sales policy pursued by central banks worldwide from the 90s onwards the supply of gold from mining sources has gradually declined. These banks began to cut down on their holdings of gold thinking that currencies offered better store value.

However with gold emerging as a sought after investment option again central banks are now scurrying to buy gold. The demand has increased for a commodity that is in shorter supply and this has tightened the market and increased prices. Even scrap sales of gold are rising sharply.

Conclusion – The Price of Gold Should Continue Its Upwards Trend

There are many other factors that can be attributed to the increase in the price of gold.

A new economic force has emerged in the world in the form of China. Its gold holdings stand in excess of 1,050 metric tons and that accounts for about 2% of its 2.3 trillion dollars worth of reserves in foreign currency.

India, another Asian powerhouse has recently become the largest gold importer in the world. Out of over 403 metric tons of gold sold by the IMF last year India bought 200 metric tons.

As well as countries strengthening their gold reserves this has become a recent trend amongst billionaires and multimillionaires too, all for the same reason. They see gold as a safer bet than paper currency and they are buying it in large volumes as a way to protect their wealth in these turbulent economic times that the world is facing.

All of this suggests that the price of gold will continue its upwards trend. If you wish to make gold part of your investment portfolio click here for details of how to buy gold from the ease and comfort of your own home.

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Price of Gold – Overview

Since early days the price of gold has remained consistently steady because man has always known the worth of this precious metal. Thousands of years ago gold was a rare commodity and it still is today. The people of ancient times, having realized the worth and rarity of gold, used it as a mode of currency as well as for ornamentation purposes.

For centuries gold has been an integral part of economies and money systems. In fact the economies of many nations were historically determined on the basis of their gold stock. The result has been that gold prices have always trended upwards.

In today’s turbulent global economy investing in this precious metal is becoming an increasingly important and popular component in maintaining a healthy and profitable investment portfolio.

Going Back In History

Let’s find out how gold was used by man as a form of currency. For this we have to go back to the times of the ancient Egyptians and Sumerians. It was they who first understood the value of gold along with other precious metals.

They began to use gold for ornamentation. Later they started to make gold coins. Before the advent of gold coins the exchange of goods and services were based on the barter system. The introduction of gold coins brought about a new scenario. People began to use it as a form of currency to buy goods and services. As a result the price of gold began its ascendancy.

As time passed, in addition to gold coins world economies introduced a new form of currency – paper money. This development did not undermine the value of gold however and the price for gold remained unaffected.

Until the 20th century there existed a ‘gold standard’ which is defined as ‘a monetary system in which the standard economic unit of account is a fixed mass of gold’. During those times the price of gold was more or less fixed and as such was conductive for fair trade.

It didn’t fluctuate much because paper money could be easily converted into gold or other precious metals. Even if it did fluctuate it was only marginal (just a few cents) with the purpose being to meet expenses like shipping and insurance.

The First World War had a deep impact on money convertibility. Since many leading countries of the world were involved, it became increasingly difficult to transfer wealth.

It also affected the exchange rate that was previously fixed worldwide. Political alliances and varying foreign exchange rates affected the stability of gold bullion and as a result the price of gold began to fluctuate.

The beginning of the 20^th century brought with it many changes. It left behind the old standard of backing paper money with gold or other precious metals. Countries like the U.S. and UK abandoned gold and instead pursued a policy of increasing the production of paper currency.

This ushered in a new era of gold investing and the market was opened up to accommodate it.

The 1940s witnessed a surge in the mining industry and during that time production almost doubled. At that time the gold price was $35 an ounce. Thereafter the price began to climb steadily. People realized the advantages of investing in gold. Moreover, since in terms of worth gold had an inherent stability more and more investors began to invest in this precious metal.

1971 – A Major Turning Point For The Price of Gold

Since the 20th century there has been a surge in gold investing and as a result the price of gold has maintained an upward trend. Gold as a strong investment vehicle increased dramatically post 1971 when the global economy completely discarded gold as an anchor for paper money. This was due to President Nixon ending the Bretton Woods exchange and removing the gold standard from the US dollar.

This resulted in gold prices hitting a then record high of $850 an ounce in 1980. Of course certain world events like the Soviet invasion of Afghanistan and the Islamic Revolution in Iran which created global tensions were to some extent responsible for this as well.

Investors scurrying to lower their holdings risk and also to ensure safe investments began to invest in gold because they recognized its inherent stability and underlying worth. The returns they got belied their expectations.

Although the gold price witnessed a meteoric rise to $850 an ounce it did gradually fall back but still remained high in comparison to the level before its rise. Over time investors began to see gold as a form of safe and profitable investment and not just a safe haven in times of crisis. Gold became an attractive and effective investment option to build and maintain wealth and continues to be so today.

During the economic crisis of the 80’s investors who had put their faith in gold were well rewarded and were able to ride out the storm.

Towards the later part of the 20^th century the overall value of gold did hover a bit. When equities skyrocketed in the 90’s they did overshadow the steady values of gold for a while.

But then investors who had invested in gold came out as winners during 2001 and 2007 when many investment portfolios were destroyed by tough markets, recessions and bubbles.

Coming right up to the present day, gold continues to shine. It is an astonishing fact that gold is up 600% since 2002! This is mainly due to the negative correlation that gold has with stocks, Treasury bills, bonds and the value of the US dollar.  What this means is that over time gold has always moved in the opposite direction to these other forms of investment.

The Historic Price of Gold – Conclusion

Although gold is considered by many to be a conservative investment option its strongest point is its underlying and inherent value. Investors have witnessed its ability to generate large returns when other forms of popular investments have crashed.

Today there is an overall belief that one’s investment portfolio should include gold. Financial experts all tend to agree with this. Often what they don’t agree on though is the percentage that gold should be of your overall investment portfolio.  This ranges from 10% to 30%, depending on who you talk to.

All this is underpinned by the overall belief that the price of gold will continue to rise over time and act as a wealth protection cushion during the uncertain times lying ahead.  Did you know that you can invest in gold from the comfort of your own home? Discover how to here.

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If you are interested in the price of gold as an investor then you’re going to often wonder how this price gets affected by certain events that occur in the world during any given time. It’s important to understand why the price of gold will rise on occasion, and it’s also important to understand why it will often drop at certain times as well.

We’re going to take a look at three frequently asked questions about this very topic. So please continue reading and hopefully some of your pressing questions will be answered here.

Price Of Gold Question #1 – How does the value of the US dollar affect the price of gold?

This is a very good question because the gold price is linked into the value of the US dollar.

If the US dollar is looked upon as weak by investors and the rest of the world, then you can automatically assume that gold prices are going to continue to rise while the US dollar stays that way.

This happens all the time when the dollar is particularly weak because investors fear losing their wealth. So they tend to flock in droves to buying gold because gold is always looked upon as an asset that is worth a lot more than paper money.

The value of gold goes way back throughout history and gold has been one of the main forms of currency for thousands of years. This really hasn’t changed all that much and all of the individuals who have a strong interest in money know this so they buy up lots of gold when they are afraid to keep their wealth in paper (fiat) currencies.

Price Of Gold Question #2 – Is it true that China and India are now acquiring a lot of gold and thereby tremendously affecting the gold price?

Yes, it is very true. For the first time in history the Chinese citizens were granted the right to own gold ingots during the year 2004, so there has been a tremendous influx in gold buying from China since that point.

This major change by the Chinese government is one of the main factors that sustained the gold bull market that has been taking place over the last 11 years or so. Since there are over 1 billion people living in China, you could obviously expect there to be an extremely high demand for gold now that they are finally allowed and actually encouraged by their government to own it.

Price Of Gold Question #3 – How does the rising level of gold investments affect gold prices?

Well, since the demand is very high for gold right now, then it also follows suit that the price will continue to rise as long as there are investors still interested in it. Since gold is a major hedge against inflation, and inflation only looks to be getting worse instead of better, you can expect there to be many active gold investors for the foreseeable future.

If you too would like to take advantage of this incredible gold buying market, then you should put your contact information into the form below and send it in. A specialist from Regal Assets, the Company that I use when I am buying gold and whom I highly recommend, will contact you to set up delivery of a free gold investors kit and answer any questions that you might have.

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