If you are interested in investing in gold, then you’ve probably started to research a little bit about what that entails. You’ve read that gold is a safe investment. You’ve also read that the value of gold varies year-to-year. So you are wondering why it seems to vary and what causes that difference every year.
Continue reading to learn what affects gold prices and what that means as an investor.
What Affects Gold Prices?
There are a few different factors that can cause the value of gold to fluctuate.
Economy & Inflation
The biggest issue with the economy is that there is nothing certain about it. The stock market could crash tomorrow leaving us with another Great Depression. This doesn’t mean that the value of gold will go down though.
The weakening of an economy can actually be what makes the price of gold go up. When the economy gets stronger, the value of gold may be diminished.
The price of gold, like the price of most goods, is linked with inflation. Inflation is when the cost of an item increases while the value of money stays the same.
Supply & Demand
Gold is in high demand while there is only a limited supply of it available. There is quite a lot of gold in the world, but a lot of it hasn’t been unearthed yet.
50% of gold is used in jewelry because it is beautiful. While 40% of it is used in physical investment because it is valuable and doesn’t lose its value as easily as other monetary items. The other 10% of gold is used in industry where it has a high value because it is a good conductor of energy.
The price of gold is affected when the supply increases. If too much gold is produced, then the price will drop because it will be more easily obtainable. When supply decreases, the value and price tend to increase.
When demand increases, the price of gold will also be affected. If there comes a time where there is not enough gold to meet the demand then the price will skyrocket. It will be even more difficult to come by. It will become even more profitable to an investor in need of trading out their physical stock for money.
Learn More About Gold History
Ever since the Gold Rush, gold has seemed like a solid investment idea. This article by Investor Crate showcases the United States’ history of mintage. Most of the time, the price is increasing, but that doesn’t mean that it will never depreciate in value. If that time came, it would be devastating to investors that rely on gold as an investment. The World Gold Council depicts how the price of gold is constantly changing.
Gold Can Be a Good Investment
Now that you know what affects gold prices, you will be able to make better investment decisions. It can still be a good investment option for you.
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