Gold is the most popular investment tool ever in the world. There’s a gold market stating Gold prices in the world and its most subject to speculation market in the world because derivatives and futures contracts are incursion in this market. Gold was used as an investment tool since the first modern ages of world but after 19th century, specifying gold standards became a must. Firstly European countries accepted new Gold standards then other countries accepted it. London gold fixing is the most common benchmark tool today for Gold Price. There are lots of factors affecting gold price in the world. How many factors are there influencing Gold Price in the world?
Supply and demand is one of the main factors influencing gold price in the world. Also speculation is an important factor. Most important thing in supply and demand is where mined golden is using for. In recent years 2,000 tons of total 2500 tones went to jewelry or dental products. 500 tones are used by retail investors.
In recent years, Central banks became a main factor on Gold prices. Also International Monetary Fund was an important tool because two of them are holding %19 of world’s official gold reserves. In 1999, countries made a ten year agreement called “Washington Agreement on Gold” and gold sell is limited. It influenced Gold prices directly since 2009. Today it’s still possible to see effects of agreement of Gold prices. Also in 2000s second half, China and Russia Central Banks started to improve their gold reserve. India Central Bank always influence Gold price because they surprisingly buy gold and shocks prices. Also countries’ monetary policy decisions influence gold price. Sometimes a signal from inside may cause all central banks raise interest rates.
Also hedges are very influential on gold prices. Sometimes Gold is using as hedge against devaluation, inflation and deflation. When especially an important country’s economy is under pressure, they use some ways to overcome it. In this period, people buy precious metals mostly gold against economic problems.
Jewelry is also an important influencer on gold price. Two-thirds of annual gold demand comes from jewelry. India, China and U.S are the biggest consumers.
Industrial demand is an important factor because dentistry, medical use and other industrial uses risen to 12% of gold demand in recent years. Its power on resisting bacterial colonization and corrosion is opened a way for gold demand on recent century. Especially electrical conductivity properties and thermal sites are using gold.
Gold jewelry recycling industry was not a big influencer on 50s but today it’s a multi-billion dollar industry. But today there are some problems about gold jewelry recycling market because of seller’s behavior.
Today factors like war, national emergency and invasion are not so shocking like 30s, but they are playing an important role. Main reason these factors are effecting gold prices are that when it’s an emergency period, people don’t want to carry or hold gold because money is easier to buy something. U.S lived this problem on 30s Great Depression. When rumors rise about all banks will bankrupt, American people went to banks and tried to take their deposits back. It created a national emergency situation and Executive Order 6102 called this movement as “hoarding”.
Today lots of writers believe that gold price rates and market need a real revolution because problems like money laundering are a way people using by gold. Also there are lots of reports that terrorist organizations are using this system. Advance fee fraud and high-yield investment programs are other problems of market.