This question preoccupies the mind of everyone who is directly or indirectly related to investment in gold or in some other form. Gold has always occupied a prominent position in determining the global economy. The price of gold is considered as a major indicator of the status of global economy.
The value of the US dollar is the primary factor that governs the price of gold. The price of gold will be low and controlled if the US dollar is strong. The price of gold will rise if the US dollar weakens.
World economies are shaped because of the vital role of the US economy. People invest, buy and trade in dollars when the US dollar is strong. On the other hand, the US economy has suffered a lot during recent times. People have started investing in gold because the US dollar has lost its eminence as the highest trading currency.
Inflation is ruled over when nations have high gold reserves. The trend seen in the past couple of years shows that when people see that the US dollar is weakening in the stock and the currency market, they start investing their funds in gold coins and gold funds. The increase in demand of gold adds more value to their investments.
Gold is also dependant on the supply and demand rule in comparison to all other commodities. The biggest buyers of gold for jewellery markets are China and India. For the first time in history, the Chinese citizens were granted ownership of gold in the year 2004.
China and India are the areas that have been termed as the biggest retailers of bullion. This has been going on for generations due to their jewellery market.
Due to the rising cost of production in gold mining, strikes by gold miners, worsening political situation, the sharp increase in the oil prices after the Iraq war and terrorist attacks, a decline in the gold mining production has been recorded for the past five years.
The world population is constantly rising, and so is the demand of investment in gold. Man has always believed in investing in gold. So, the price of gold is also affected by the natural desire of man to hoard gold.
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