All that glitters is surely Gold

Gold is a monetary metal that adds value to the neck when its value increases on the bullion and chokes the neck when it’s value falls. But because the lustrous metal continues to shine on in the market, the later has never really come into being. However, the price of gold is determined by inflation, by fluctuation in the dollar and the stocks, by currency related crises, by interest related crisis, by interest rate volatility and international tensions and by increase or decrease in the prices of the other commodities. The price of gold reacts to supply and demand changes and can be influenced by consumer spending and overall levels of affluence.

The value of gold has been rising adding to its value. To think on lines of the usefulness of gold, it is primarily produced for accumulation. Gold’s actual value does not arise from its usefulness in industrial or consumable applications. It arises from its use and worldwide acceptance as store of value. Moreover, gold is money. In contrast to other commodities, gold does not perish, tarnish or corrode, nor does gold have quality grades. The value of gold years ago is no different from its value today.

Gold has its own reasons to shine in the market. In fact it’s not just the last couple of days that have been seeing upward peaks on the bullion market but it also the next several years, which would be great and bid upside surprises to most of the investing public.

The dollar has lost 50% of its value versus the euro. Plus the EU possesses a 15 times greater amount of gold to back their currency. Large institutions and central banks are moving their dollar-based assets into non-dollar-based assets. This is coming at a time when the U.S. Economy is slowing to a crawl. Having realized that we are in inflation crisis where the dollar suffers one of the great meltdowns in monetary history, gold will reclaim its place at the center of the global financial system as a hedge against inflation.

Also, mine production is falling at the same time that demand is rising. Worldwide investment demand for gold will remains at historically high levels, significantly exceeding 40 million ounces. Experts say that jewellery demand alone is now outstripping new mine projects. Another reason for rise in the gold price is because investors are willing to move only into stable assets. Investors look at gold as an asset because it has maintained an intrinsic value. Gold will not get lost in an accounting scandal or a market collapse. Moreover, assets such as gold have provided portfolios with a much needed protection and at the same time increases the value of portfolios over the stock market during the past few years.

Gold acts as a safe haven in the times of geopolitical and financial market instability. It is then that gold transforms itself completely into a universal currency that circulates with its original value everywhere. Therefore, both India and China are in the process of liberalizing laws relating to the import and sale of the gold in ways that will facilitate gold purchases on a mammoth scale. The Gold Dinar is also being discussed openly in the Islamic world. Russia as a matter of fact has enjoyed foreign trade of gold with the flourishing middle classes.

The only paradox with gold is that high gold price leads to a higher demand and high price leads to lower supply. However, gold has surely earned itself the gold medal where it comes to investment. Becoming the easiest, safest and most profitable way to invest, it has left no other the reasons for its rise.

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***Written for an editorial in FE while interning with them***
---got published, without a byline---