Gold is a precious metal. Its colour is metallic yellow. By addition of copper and silver different colours of gold can be obtained to add more beauty in this metal. Apart from its use of storage, it has also many industrial uses as well. It can be used for making jewellery, food and drink etc. It is also used in industries and electronics. Gold is found in ores made up of rocks. South Africa is the major supplier of gold all over the world. India is considered to be one of the major consumers of gold.
Since 1991, the London Gold Fixing has been the standard procedure, by which the price of gold is determined twice everyday (morning and evening), through the collaboration of the representatives of the five bullion trading firms of the London Bullion Market. Gold is traded at the spot price in all parts of the world in gold trading markets.
Like everything else, price of gold is determined to a large extent by the forces of demand and supply. Other factors such as inflation, GDP growth rate, and strength of the dollar are all key factors that affect its price.
Although now the situation has changed to “crisis hedge”, rather than “inflation hedge”. This is because now is the period where stock markets crash worldwide. Surprisingly, gold has taken off on its heels and its prices are now sky high. So people who have gold in their reserves now are benefiting. They will use their gold reserves only when they suffer intense crisis.
Though this is a broader picture, exceptions do vary. Some countries might face rapid periods of inflation; some countries might face war. Some might face disaster or at some places calamity may rise due to any unknown reason. At this time, all that they might be having with them is gold. Unfortunately, gold will not come forward as their saviour at this point in time. These unlucky people who would have bought gold for the price of a limousine might now have to sell it at the price of a motorbike.
Many investors view gold as a hedge against inflation. The risk of inflation is something which does need a precautionary measure and should be taken seriously. Precious metals have remained valuable even in times of inflation. This is because as the value of dollar drops, people fling to own stores of value, gold being the best choice for the purpose.
Some specialists have taken a deep insight of this uncertainty. They say that a country’s gold reserves as well as their oil reserves are a matter of sheer concern. This is because gold and oil are the two factors which bring a handsome illustration out of your economic figures. The countries which have stocks piled of gold and oil, they would not have any concept of a “crisis” or “inflation” hedge.
And people don’t need gold but turn to gold when they’re concerned about the value of paper money, so that makes it a good hedge in opposition to inflation.
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