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Gold is one of the oldest forms of investments available, but many people do not understand how the price of gold is set. Whether you are interested in diversifying your assets or worried about the consequences of an economic depression, it is important to understand the factors that influence rising gold prices. At one time, the value of gold was based on the gold standard. Under this monetary system, citizens were able to convert paper money into fixed quantities of gold whenever they wished. However, the gold standard ended on 15 August 1971 when governments were given the freedom to print as much paper money as they saw fit. Today, the price of gold is set by the Gold Fixing. Also known as the Gold Fix or London Gold Fixing, this is a meeting of five members of the London Gold Pool that is conducted twice a day by telephone, at 10:30 GMT and 15:00 GMT. Officially, the purpose of the Gold Fixing is to settle contracts between members of the London bullion market. However, the Gold Fixing is widely recognized as the benchmark used to price gold and gold products throughout the world. People can invest in gold directly through bullion ownership or opt for indirect investments such as certificates, derivatives, or shares. As with most other forms of investments, the price of gold is greatly influenced by supply and demand. Unfortunately, gold is rather unique in that most of the gold ever mined is still in existence and could thus enter the market at any time. This leaves the price of gold open to influences from hoarding and disposal practices. During times of national crisis, such as a war or a serious natural disaster, the price of gold tends to greatly increase. People start to fear that their paper currency may no longer hold value, but they see gold as a stable asset that can always be used to purchase food and other necessities. Another common factor influencing rising gold prices is the success of the real estate market. When there are low or negative returns on real estate, the demand for gold and other commodities typically is expected to increase. Bank failures, although somewhat uncommon today, can also contribute to an increase in the price of gold. The best example of this occurred during the Great Depression, when rising gold prices due to bank failures led President Roosevelt to ban the holding of gold by private citizens.
10 Reasons Why the Gold Price Will Rise Rapidly
these are the primary reasons why the stage is set for making your fortune. China is encouraging its citizens to buy gold . India. In no particular order. 4. A move like this sends a message . Gold has been sold in such large quantities to control the price.believes gold stocks will gain 2% to 3% for every 1% move in gold. The only way of slowing down demand is to let the price rise.the Gold cartel is made up of the US Government and a collection of bullion and central banks. classic supply and demand will win.with the world's largest population. Central banks have long been sources of gold bullion used to manipulate the market and suppress the price of gold . the infrastructural problems of South Africa have significantly effected their output. In addition. and we want it safely stored where we can see and control it. and one of the fastest growing economies China has made it legal for their citizens to buy gold and silver. 3.There have been some incredibly interesting and provocative statements on the subject of Gold in the last few weeks. Transfer of Gold Depositories .we will be accumulating gold.in excess of $2000 an ounce . China is adding to its gold reserves . investors need to be aware of the reasons for the expected rise in the gold price. The question is how far and how fast. The manager of the USAA Precious Metals and Minerals Fund . Shortage of Supply . And the more speculative stocks are likely to far exceed these targets. as we speak.the number one precious metals mutual fund over the last 10 years . 1. Gold will continue to rise. Selling of Gold by the Gold Cartel . is expected to continue purchasing for jewelery.Hong Kong has recently completed a high tech security vault at the city Airport. 6. and increasingly for investment. or even slow down the depletion of gold bullion stocks.China is making no secret of the fact that it intends to increase its gold reserves. where we can access it instantly. As our target for gold is at least 100% from here .the current economic conditions combined with the increase in production costs have slowed down gold exploration and production. and where its out of harms way. 5. transferring its gold holdings from London to its new secure depository. The world is already engaged in more conflict than at any time since the second world war.but they are running out. which has been the largest buyer of gold until now. To feel comfortable with investing in precious metals. Increasing war and social unrest . and now holds in excess of 1050 metric tons. and are actively encouraging them to invest in these precious metals. India already eats up the bulk . The Hong Kong Authorities are. However hard they try to manipulate the market.this would mean gold stocks could rise 200-300%. But the message is simple. there is not sufficient production to reverse. The Chinese are long term thinkers and are undoubtedly taking this in to account as they accumulate gold and silver to store it close to home. 7. 2.war and social insurrection can escalate rapidly.
but currencies will at some stage be competing against each other for devaluation. they no longer provide security. the SPDR Gold Trust buys gold to back its shares. Inflation causes gold to rise.the steep decline of the dollar has effected the rise in the gold price. leaving limited quantity for ever competing and ever larger demand. If this is indeed the case. MAY 10.of the annual mine output. She has prepared a complimentary report packed with facts which you can download at Gold Report Anna enjoys sharing her knowledge with other enthusiasts. TUESDAY. After a deflationary period.as China). GLD. inflation was averaging 14% and peaked at over 20%. 8. This could happen again. There is more on this subject in our Gold Report 9. and gold becomes the new money. If you join our web site community you will have free access to a valuable regularly updated collection of articles. Inflation vs. but that has changed and suddenly there are so many opportunities out there to profit from gold and silver. comments and conversations on gold and silver. When gold last peaked at $887 in 1980. . Their demand on gold output is a major push on the gold price. Anna P. 2005 . Until recently Gold has not been an area the average investor would consider.They are currently supposed to hold over 1000 tons of gold (almost the same quantity. Best was based in Singapore for many years where she developed her interest in precious metals. All currencies become unreliable. the bulk of assets will be owned by Asian interests and the new world order will prevail. the billions of dollars being pumped in to the markets will become inflationary. Click the Gold Report link above. Paper currency devaluation . deflation .the argument persists. Mortgages had risen in excess of 17%. 10. When this stage is reached we've gone full circle.
2. Gold is an inflation fighter and they can see stagflation approaching. Alex says the reasons being stated for the gold prices to increase are: 1. 8. thus setting a new price floor. 9. The real possibility of Asian countries buying whatever gold the European Central Banks dish up." . The Washington Agreement supporting gold by being generally against excessive Central Bank gold sales. with the US opposing it. 7. Gold is a "de facto currency" and therefore not subject to demand deficiencies caused by world wide economic slowdowns. It's a natural hedge against the US dollar. The never-ending story of the US trade deficit. Gordon Brown striking out on his IMF gold sales proposal. which is considered a "strong buy signal. 4. 3.Reasons for Gold Price to Increase Alex Wallenwein of a1-guide-to-gold-investments says that the main stream press is suddenly reporting on the reasons why the gold price will increase. An under supply of newly-mined gold. despite gold analyists reporting these reasons for over 2 years without any mention in the mainstream news. It traded predominantly between $420 and $435 this year. 5. 6.
For example.S. Therefore. Of the major assets. particularly because of the high concentration of uses of platinum in new automobiles – an endangered species in an economy in which automakers are begging for funds from Washington just to keep them afloat.S. a $700 billion Bailout with more to come. the disappearance of the investment banking industry.” U. rather than from deflation itself. but have not performed as well as gold during this crisis.S. and the Bank of England’s by 158%. In the past twelve months. not the ceiling. platinum’s demand from industrial uses has fallen rapidly. That has come as a surprise to many who expected that . economy make the environment favorable for gold and other tangible assets. it becomes increasingly apparent that fear predominates. Freddie Mac and AIG. U. retail sales and consumer sentiment. which is classically inflationary. stock mutual funds and bond mutual funds in one of the biggest flights to safety the financial industry has ever seen. stimulus packages and bailouts mean much more money in the system. dollar weakness. although gold has done well.80 in mid-March and Mints around the world ran out of popular gold coins and small gold bars after the collapse of Lehman Bros. REFLATION Gold benefits from the cure for deflation. Gold’s value does not arise from its usefulness in industrial or consumable applications. as well as the unwinding of bets made with borrowed dollars. Other analysts believe that $1500 is the floor. DEMAND The U. U. financial institutions are toppling like tenpins and confidence in those institutions has never been lower. we have seen the nationalization of Fannie Mae. the Federal Reserve’s balance sheet grew by 146%. ending the year above $850 a troy ounce. Huge amounts of money supply growth are on the way. It arises from its use and worldwide acceptance as a store of value and a safe haven. while investment makes up only one-third of the total demand for platinum. the largest bank failure in history. the “breaking-ofthe-buck” of the supposedly rock-solid money market funds.S. and the longer term inflationary pressures of the Federal Reserve throwing trillions of dollars at the U. Historically low U. with the Dow suffering its worst annual decline since 1931. While inflation isn’t apparent today. Last year was the worst year for global equity markets since the Great Depression. consumer confidence has fallen more sharply than in any period since records began in 1978. Gold is different from other precious metals such as platinum. the bankruptcy of Lehman Brothers. Investors are pulling huge amounts of money from hedge funds.” Reputable economists are saying “this looks an awful lot like the beginning of the second Great Depression.4% over 2008. The Fed and central banks throughout the world are sending so much money sloshing through the system that they will eventually generate a bad case of inflation. the market is going to get over its concerns about deflation and become concerned about inflation – that will be the real inflection point for gold. the collapse of home values.Reasons Why Gold Will Rise ECONOMY How bad can things get? Former Secretary of the Treasury Paulson talks of the current crisis being potentially worse than the Great Depression. Because of the inflationary impact of the Bailouts. Gold rose 5. At some point. Merrill Lynch predicts that gold will hit $1500. Individual investors are abandoning anything with the slightest hint of risk. palladium and silver because the demand for these precious metals arises principally from their industrial applications. Other precious metals have also been classified as Defensive Assets. Gold bullion reached $1. the Swiss national bank’s by 74%. THE DOLLAR The dollar has benefited from the global flight from risky assets. the socialization of the auto industry.S. the European central banks’ by 58%. Alan Greenspan told Congress that the financial meltdown had left him in a “state of shocked disbelief.030. rate cut to virtually zero lowers the opportunity cost of buying gold and gold ETF holdings have exploded from 7 million ounces to over 30 million ounces in less than four years. investment accounts for about 90% of the demand for gold. only Treasuries and gold have escaped the selling panic that has gripped the markets.S. interest rates. and an unprecedented shattering of confidence in both commodities and financial assets. Anything remotely risky or linked to the performance of the global economy was shunned. in September. the biggest fall in industrial production in 34 years. the implosion of global stock markets. FEAR As the market does its daily job of balancing fear and greed. Since September 9.
investors now have access to $50 coins that each contain one troy ounce of the purest gold available in any coin. The American Eagle Gold Bullion coin is an excellent way to own and hold gold.S economy would cripple the dollar. Many investors combine tangible assets like gold with their stock and bond portfolios to reduce risk.S. Gold offers a higher level of liquidity and intrinsic value than purely paper investments.500 by year-end. And tangible assets have produced exceptional investment returns on their own. correlation with stocks and bonds. you’re buying gold bullion coins whose weight. GOLD PRICES We expect to see an eventual breakout in gold prices once the dollar softens more decisively and once reflationary policies gain economic traction. This makes them recognized not only as America’s official investment-grade gold bullion. Whether buying American Eagle Gold Bullion or American Buffalo Gold Bullion coins. Dollar weakness. government. THE GOLD AMERICAN EAGLE AND GOLD AMERICAN BUFFALO: GUARANTEED BY THE U. Such conditions are consistent with higher gold prices and we expect to see gold prices exceed their prior peak by summer and exceed $1. Diversification into tangible assets. American Eagles are the best-selling gold bullion coins in America. The Best Way To Buy Gold. is a highly recommended strategy for the savvy and prudent investor. GOVERNMENT. like gold. .000.S. We see a breakout above $1. They are traded worldwide on a daily basis. but are expected to do so in an orderly fashion since no country wants a strong currency in a deflationary world.00 per ounce as a sign that U.S. even negative. With the introduction of the new American Buffalo Gold Bullion 24-karat gold coin. In the longer term. which will decline as the economy falters and the government continues to inject additional liquidity. so they always have a ready market.S. DIVERSIFICATION REDUCES RISK. but accepted worldwide in major investment markets. the dollar’s health remains dependent upon foreigners’ appetite for U. Liquidity conditions will be easier and easier as the year progresses as part of the fight to support the economy and reduce deflationary pressures. plentiful liquidity and policy reflation will be persistent themes over the next year or so. assets. content and purity are guaranteed by the U. monetary and fiscal policy is finally getting ahead of the deflation curve. This is due to the fact that tangible assets have historically had a very low. Massive fiscal and monetary stimulus have combined to weaken the dollar.increased government spending and a collapsing U. You can even include them in an IRA or SEP.
bomb blasts. 2. . assassinations of government officials. Different market cycles will bring investing in diverse portions of the market. Gold Price Per Ounce Forecasts Raised During Political and Economic Tensions As economies de-rail. 4.Gold's Rising Spot Prices and Economic Factors WHY BULLION PRICES PER OUNCE ARE RISING IN VALUE Dec 15. and civil unrest. and other news worthy items can lead to investors buying up gold. A major stock market correction or upheaval can have similar consequences. 5. Whether or not these economic events continue in 2010 remains to be seen. Why might there be a strong correlation between these two very different commodities? One reason could be that an increase of interest in any commodity leads to enlarged buying in other commodities such as oil and precious metals. gold prices are closely linked to oil. the investors therein will often turn to gold as a ‘safe haven.’ Turning their investments from currency to gold bullion will allow investors some limited protection from localized problems that may inflate or otherwise devalue their dollar. Gold Bullion Values are Linked to Oil The spot price of gold and oil has often been noted as having a symbiotic relationship on charts. 2009 Kurtis Hemmerling Gold's high price forecast for 2010 and current spot price per ounce values beyond can be rationalized partially with these common economic factors: 1. 3. Interestingly. US Dollar Weakness Central Banks Buying Gold Increased Interest in Future and Commodity Trading Gold Producers De-hedging Futures Contracts Supply and Demand Imbalance But there are other reasons for a high value per ounce on this precious metal. One cycle might be led by commodities. What are some of these events that can trigger gold buying and high value forecasts? Terrorist attacks.
another by high growth stocks. while others are not quite as optimistic. The Hindu Business Line. . If oil continues to rise in 2010. A second reason that world gold prices are historically linked to oil is that as petroleum products rise. Sources Jeffery Nichols. gold could gain stability from it creating a long term trend. a careful analysis on why gold price forecasts and per ounce predictions are so high for 2010 and beyond will give one insight into this important economic market cycle. Many see the price of gold maintaining this high level with a short term correction. 08 December 2009. and still other cycles driven by large capitalization blue chip company investing. and gold bars and bullion is typically used to protect against this effect. 02 December 2009. What is Gold’s Long Term Price Forecast The article in the following link details the predictions and gold's economic forecast for 2010 from many well respected gold analysts. “High Gold Price Volatility Sees Almost $90 Fall Before Small Bounce”. “Where is Gold Headed?”. M.R. Subraman Chennai. However each investor chooses to trade the spot price surge in this commodity. “FACTBOX: What's Driving Surging Global Gold Prices?”. Mineweb. Rising oil prices quickly turns into economic wide inflation. Nov. Reuters. Atul Prakash and Jan Harvey. 29. investors turn to gold buying as a hedging tactic.
supply is likely to remain constrained as few new projects come on stream to replace ounces taken out of the market by ETFs. we foresee increased interest in gold from the investment community with faith in fiat currencies undermined. director at TheBullionDesk. are having only a relatively modest impact on growth as bank balance sheets may take longer to repair than widely expected. Ross was the fourth-best gold forecaster for 2009 with a price average of $988 per ounce.Average gold price to rise almost 30 pct in 2010 on investment demand . platinum and palladium from banks and other specialist institutions. Whilst possible default by sovereign entities may continue to play on minds in 2010.we see gold and the other precious metals as a beneficiary of this. this should increasingly provide advantage to hard assets that provide wealth preservation and risk diversification .236 per ounce in 2010.080 We forecast firm yet volatile prices for gold in 2010.com. will give rise to continuing uncertainty on the tenure and outcome of these actions. Meanwhile. on Friday. we believe.with his accompanying comments. silver. Below are Norman's 2010 forecasts .Ross Norman by The Bullion Desk Spot gold will average $1. The LBMA survey includes forecasts from leading industry analysts for gold. This. as continued strong investment demand will more than offset lower jewellery sales. predicted Ross Norman.in dollars per ounce . . We are concerned that the massive government stimulus packages via quantitative easing.236 High $1. up 27% on the 2009 average of $972. this should ensure that investment demand not only fills the gap from diminished jewellery sales as prices rise but should also lead to a significant increase in total gold demand. according to an annual poll run by the London Bullion Market Association (LBMA). As a result.425 (record level) Low $1. paid for with borrowed and printed money. GOLD Average $1.
Put simply this means as the value of the dollar falls the value of gold goes up and vice versa. This is because of the lack of any newly developed mining sites. 2008 Peter Reeves It’s been predicted that the future price of gold could rise to over $2000 dollars per ounce in the next few years. What Affects the Price of Gold? If one is to predict the future price of gold then they must consider the principal factors that affect its price.S dollar. These are.S economy can affect the price of gold. The knock on effect being that the demand increases whilst supplies stay the same and thus the price increases.S economy (particularly banking) means investors look to “safer bets” such as gold. • Gold Accounts . But how can we be sure of this and what factors need to be considered when making such a prediction. For instance below is how the U. The Effect of the U. This encompasses the above three principals.S Economy on the Future Price of Gold Gold is a commodity that is used as a “hedge” against fluctuations in the U. The supply for gold remains fairly constant at present because production has not significantly increased. How to Invest in Gold There are numerous ways in which to invest in gold. Furthermore a lack of confidence in the U. These factors are • • • Investment Demand Market Fundamental Physical Market Conditions Investors must consider how these different factors might alter in years to come. Investors can rest easy though because even if the levels of production increased the fact is the amount of gold on the planet is limited and eventually it will run out meaning the price (in theory) can only increase in time.Predicting the Future Price of Gold ARE GOLD COMMODITIES A SAFE MARKET INVESTMENT? Aug 14.
Gold Futures trading is seen to be less high risk than other futures trading because it is not a vulnerable to massive price fluctuations like other commodities. . Futures investments are common in the commodities markets and gold is no exception. Gold Futures A futures investment is basically when you agree to buy or sell shares in a stock at a specific time in the future for a set price (agreed by the buyer and seller). MUMBAI: India. the leading player in import and trade in bullion and export of jewellery. IBMA set to catapult India as price-setter in bullion trade. The upside of this is that the growth in the share price can actually be more than the gold price per ounce growth. is set to become a 'price-setter' from the position of a 'price-taker' in bullion trade.• • • • Gold Bars or Coins Exchange Traded Funds Unit Trusts and Investment Trust Mining Companies Mining companies’ shares present more of a risk than just investing in gold assets because they can be affected by other market/physical factors. a top industry official said.
nominated agencies. The idea of launching IBMA is to promote a professional organisation dedicated towards the growth and development of bullion trade and industry. which in turn severely affects import of gold in India." NSEL Managing Director and CEO. It also aims to create linkages between domestic stock of gold and silver. But. India will be able to create a benchmark Indian spot price for bullion. prices of gold and silver differ from place to place in India even at the same moment." Bombay Bullion Association President. dealers. This has severely affected the bullion and jewellery trade in India. The exports of Indian gold bar is also not allowed by the Government. In fact. Suresh Hundia. said. told reporters here. if the international price goes above a certain level. recycled gold and silver and to remove disparity between domestic prices and international prices. the bullion market has witnessed a high degree of volatility in prices. an industry official said. IBMA is a national level trade association for representing bullion importers. exporters. as demand for ornaments as well as bullion usually comes down if prices are volatile. investors. "By bringing together bullion dealers and jewellers. which is valid for the entire country. IBMA is committed to identify the inefficiencies involved in Indian bullion market and to create a momentum to remove such inefficiencies in a gradual but steady manner. "Following the setting up of the Indian Bullion Market Association (IBMA) by leading bullion and jewellery merchants associations in alliance with the National Spot Exchange (NSEL). ornament dealers. refineries and all stakeholders connected directly or . traders. Anjani Sinha. It creates a distortion in physical trade. jewellery merchants. This creates a disparity in Indian gold price and international prices. IBMA will address global bullion issues and reduce disparity between domestic prices and international prices. mostly due to fluctuation in the international market and factors influencing dollar valuations. bullion banks. During recent times. where both import and export of the commodity is allowed without any hassle. the official said. The country depends on the international market for the benchmark price which is based on London AM/PM price fixing. The objective of promoting IBMA is to create linkages between domestic stock of gold and silver.India imports around 25 per cent of the world's gold production. there are a number of restrictions on import as well as export of gold. Most of the other commodities and merchandise are under OGL. still it does not exert any significant impact in discovery of gold prices in the international market due to its fragmented and unorganised bullion trade. There is no benchmark price available. consumers. in case of gold and silver.
56-crore. India is the leading consumer and importer of bullion. which may directly or indirectly impact the bullion trade and industry. announcements relating to import duty.749. The domestic bullion and jewellery market is estimated to be around USD 16. Out of this.1-billion. which is expected to grow to the size of USD 25-billion within 2-3 years. IBMA has plans to set up offices in major bullion trading hubs and provide customised services to the bullion dealers in trading. which accounts for 20 per cent of world gold consumption. import and export policies. Sinha said. around 600 MT of gold goes into making jewellery. It consumes nearly 800 MT of gold. RBI. VAT and other issues. delivery and settlements. India's gem and jewellery sector commands around 80 per cent of the jewellery trade worldwide. . nominated agencies.indirectly with the bullion trade and industry. Total exports of jewellery in April 2009 was at Rs 5. IBMA would interact with the Central Government. banks and other regulators for submission of impartial views relating to the bullion trade and industry and to have consistent follow-up regarding major policy initiatives. budget proposals. State Government.
director and CEO of Reliance Money Sudip Bandyopadhyay said here Monday: “We have not approached them so far but we will be intimating the authorities for necessary clearances.000 towns. we want to launch it in a month’s time. it is not just the trading platform which we plan to launch. Bandyopadhyay said: “The company itself will not deal with trading but it will just provide a platform. In the proposed platform. may soon manage to move from being a mere “price taker” to a “price maker” in the world of royal metal. we will contribute through our strong retail presence with over 10. Suresh Hundia.000 plus outlets spread across 5. said: “That is one of the reasons why because we are launching such a platform. “As far as we are concerned. we will focus on setting up the gold in line with the blobal market cues. April 21 (IANS) India. has decided to set up its own trading platform for gold. After all. in collaboration with Bombay Stock Exchange (BSE). Talking about the functioning of the trading platform. Bandyopadhyay said it would be done through various centres.” “Moreover. Though the representatives of the respective partners of the proposed joint venture (JV) denied that the decision had. The price fluctuation was a thorny issue for the gold traders. while BSE along with NMCE would look into the global variations and provide the link-up required with the commodities market. Though India was a leading consumer of gold. In nutshell. Asked whether the yet-to-be formed limited company has obtained the requisite permission from the authorities including the Reserve Bank of India (RBI). a “total helplessness” has gripped the traders in controlling the prices. whereby the gold could be purchased and sold off via online and be handled by the IT People.India may soon fix gold prices for global market(Lead) Mumbai. but will also facilitate retail investors in the purchase of gold coins and bars”. one of the leading gold consumers in the world. IT People (India) Ltd and Reliance Money Ltd. he added. National Multi-Commodity Exchange (NMCE). president of BBA. we would . We also want to set up a hallmarking centre so that it would help us in determining the prices of both gold and silver. Tired of the wild fluctuations of gold price in the London Bullion Market and its impact on Indian market.” Talking about the physical distribution.” he added.” Talking about the trading platform. the way it is being done in the AM/PM system in London. “anything to do with the recent pole-vaulting of gold price”. they agreed with the the fact that “it’s time we moved from price taker to price maker”. Bombay Bullion Association (BBA). Bandyopadhyay said the Bullion Spot Market (BSM) will be an over the counter bullion trading platform which would “help jewelers not only in monitoring the international bullion price fluctuations on real time basis.
help retail investors in purchasing gold from IT People providing technical knowledge for the exercise. .” he said.