Thursday, October 20, 2011

Why is the price of gold so high?

Why is the price of gold so high?

The price of gold is at an all time high and looks set to keep going up.

The simple reason for this is because gold prices always rise at times of uncertainty such as war or economic crisis or depression.

Nobody wants to be left holding paper money and building kites out of their savings.

Keeping a pot of gold buried under the floorboards might seem archaic but in times of economic uncertainty, it might be the safest financial option!

Investors see gold as a stable asset that will hold value when other currencies have become worthless. This creates a greater demand for it and causes the price to rise.

The property market and interest rates of the banks also affect the gold market. Generally when property and real estate prices fall and confidence in the banks is low, the demand for gold and stable commodities rises.

In addition, for the investor, dealing in gold becomes the only game in town guaranteed to get a return.
With the current economic uncertainty, this trend seems unlikely to change. Today the standard used to price gold throughout the world is based on the London Gold Pool and the Gold Fixing.
The London Gold Pool was set up in 1961 and is the pooling of gold reserves held by eight central banks in the USA and seven European countries.

The Gold Fix or the Gold Fixing is a twice-daily meeting held by five members of the London Gold Pool, conducted by telephone. It takes place at 10.30 GMT and again at 1500GMT.

The original reason of these daily meetings was to settle contracts and accounts between the members of the Gold Pool. Although this is still the case, the Gold Fixing now sets the price of gold throughout the world

Gold is a unique natural mineral. Because of its high value throughout history, it is estimated that most of the gold ever mined in the World is still in existence and could enter the market at any time. This would have a potentially disastrous affect on the World economy.

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