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Gold Investment: Factors Beyond Supply and Demand in Commodities Market

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By Daryl B. Chapman

Are you one of the many who are worried about the negative effects of inflation? Inflation is described as the increase of the prices of goods and the decrease of the value of dollar. Negatively, it affects the consumer. Consumers fear the growing prices of commodities that is why then tend to stockpile and to panic buy. Positively, it produces a good venture outcome in non-monetary capital projects.

At the moment, one of the most desirable means of investment is Gold. According to experts, gold is the most excellent inflation hedge. If you are planning to invest in gold whether bars, bullions or coins, it is important to know the different factors that drive the value of gold in the global market. Following are some of them.

Supply Versus Demand: Supply and demand are two indispensable factors that affect the price of gold and other commodities and merchandise. When there is a high demand for gold, the prices of metals frequently go down. Then again, if the demand exceeds the available supply, the global price of gold is intended to rise. As to the factors affecting the supply and demand of gold, there are many rudiments that are critical to behold like socio-economic and cultural factors. At present the biggest investors of gold are Indians and Chinese. These countries are monitored closely because a drop or a rise in export will greatly affect the global price.

Gold Mining Production Gold production directly affects the supply and demand. There are many elements that affect the gold mining production from the unending Iraq wars to the rise of oil price and unstable political conditions in the Middle East. Due to these factors, over the years the production of gold went down. As the global population continues to ascend and so is the demand for this precious investment. Remember that when the demand exceeds the supply, the price of gold can go up.

Central Banks Policies And Rules Central banks are responsible for keeping the gold reserves. It is important to be familiar with the deviating policy or changes in their guidelines since they affect the global gold prices. They can unconstructively turn people from investing in paper money. If high interest rates are offered in central banks, there is a good possibility that the rates of gold will go down.

Economic Fluidity The news of the unstable economy is not new. Many have felt the effects of recession as millions have lost their jobs and businesses. Hence, people are looking for ideal means to invest their money. Since gold is the best investment vehicle because it protects wealth against inflation the demand for gold is continuously on the rise.

The Value Of The US Currency The US Dollar is a defining element that affects the gold price. When the dollar is weak, the gold is expected to rise. Moreover, the United States Of America is very influential in the world macroeconomics.

Politics True enough the everlasting wars in Iraq and Afghanistan has affected the value of money and precious metals. Investors before they venture on gold, has to ensure that the value of gold is stable as compared to the unpredictable value of money.

Investing can be tricky. There are so many effects to behold before you invest like how supply and demand for gold. Familiarize yourself with the factors mentioned above and surely you will stay on top of your finances.

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