Forex Gold

Who Decide Gold Price in World and India

Who Decide Gold Price in World and India
Written by Harshal

Who Decide Gold Price in World and India

Gold has been always an important metal because of its financial and cultural value. More recently, gold has become a quoted asset. It is considered a refuge value because it usually maintains its value at convulsive times. Discover what factors influence the price of gold in the world and India.

As with other raw material, the price of gold is determined by global demand and supply. The price of the gold is changing throughout the day, of course, is a metal that is sold worldwide, it could not be otherwise. The gold price market closes for only one hour a day in the United States and reopens an hour later from Tokyo.

Raw Gold Price

There are key factors that affect the price of gold. The first is the national interest rate. When this increases, gold tends to fall as investors move towards government bonds and other assets whose performance is related to the interest rate.

The most important interest rate is established by the Federal Reserve, the central bank of the United States and an important arbiter of global markets.

Geopolitical events also play its part; In times of international tension, the price of gold tends to rise frequently as investors buy the product to have a high degree of security before a moment of confusion.

The levels of supply and demand are also important. Like any raw material, gold production increases and falls over time, as well as the level of demand. The important celebrations in China and India usually correspond with an increase in demand, since the citizens of these countries buy gold as a gift.

Industrial production also slightly pushes the price of gold. When production increases, the demand for gold increases and vice versa.

Gold Price History

In 1919 the price of gold was fixed in London for the first time. It is what is known as Gold Fixing. This has been in this way for a century, where the London Gold Fixing Association sets gold prices twice a day around the world. This system has provided a gold price reference for investors, producers, and banks around the world.

The Gold Fixing process starts each day when the president of the association announces the price to the rest of the members. These, in turn, communicate to their customers the price. On the other hand, the clients indicate to their representatives the price or they themselves can begin to buy and sell according to what was announced by the president.

The advertised price must achieve a balance that is when the number of ingots to buy and sell reaches a difference of 50 ingots. Once this weighting is reached, the president of the association will fix the price of gold.

Gold orders can be made in advance, even before setting the price. Subsequently, these orders will be modified as the prices are established. The operators use a small flag they keep raised to indicate that they are conducting a negotiation.

Thus, the president of Gold Fixing will not be able to declare the price of gold fixed while one of the small flags is up. Currently, Gold Fixing is still used and is the best guide that provides a reference to the price of physical gold.

Why is Gold Valuable?

Gold fulfills all the requirements to be valued and be the currency: it is fractionable, durable, scarce but easy to find, etc. Of the 118 elements of the periodic table, it is the most suitable to be used as currency.

Today the coins are no longer gold because the money is not backed by any metal, but if it were an abundant metal, no one doubts that the coins would be gold instead of copper, tin, nickel or other alloys. Some of these elements are discarded for being gases or liquids, others for reacting very easily with everyday elements such as air and heat, others, although they last, end up totally oxidizing.

In the end, we would be left with very few adequate elements. It is true that silver also serves, but it rusts, it is not eternal. This, in addition, reacts with tiny amounts of sulfur in the air. So would platinum, rhodium, iridium, etc., in general, noble metals.

These are scarce and, when analyzed, each presents its own problem; from extreme difficulty to work it up to its extreme scarcity. For this reason, the gold, as metal, it is so valuable.

Why Gold Price Fluctuate?

There are many indicators that anticipate that the price of gold will rise significantly during the next few years (or months!). Among them, there are some that are obvious as they are related to the daily supply and demand. Others, less obvious, are related to monetary policy.

The following factors will make the supply of the product insufficient to meet the demand. And we all know what happens when a product begins to be scarce in the market. The indicators of the offer:

  1. Gold is ending in the world. World production reached its peak in 2016. From now on we will see a gradual reduction, year after year.
  2. The existing reserves in the whole planet only reach for 15 years of production more.
  3. Many mining companies are already depleting the most productive veins; those that contain the highest amount of mineral per ton of rock.
  4. Given the scarcity of the product on planet Earth, is working in space mining. It is planned to replace the terrestrial production with product brought from the asteroids.

While the supply of the product is becoming increasingly scarce, the demand increases. Demand indicators:

  1. The population growth of the main consumer countries, China and India, in particular, will increase the demand for both jewelry and investment. By the year 2025, only the jewelry industry will consume 100% of the production.
  2. The central banks of many countries, mainly China, Russia, India, and Turkey, are quietly accumulating as much gold as they can, in preparation for the next currency crisis.
  3. The policy of negative interests that are being implemented in Europe and Japan is triggering additional demand for gold.

Why Gold Is So Expensive?

There are many reasons. It is perfect for industrial applications, for jewelry, and as an investment, guaranteeing our savings.

First of all, it is a beautiful and attractive metal. There is no other yellow metal. Simply its appearance, already adds value to it and the vast majority of gold production has been used in jewelry. The percentage varies according to the source, but it can be close to 80%.

On the other hand, it does not oxidize (it is a noble metal). It can remain for thousands of years with the same appearance and can be reused without losing any property indefinitely.

Gold is the best electrical conductor we know. It surpasses copper. Even with a high price, it is used in certain electrical circuits in which an excellent conductivity is needed, which does not rust and is highly guaranteed.

In addition, it is the most ductile and malleable metal that exists. It has the property of melting easily and is the easiest metal to work with.

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