Investing in gold and comparing different gold rates to each other, is completely difference then comparing insurances. When comparing carinsurances, you’ll find relatively standard rates. Gold rates in contrast can fluctuate strongly. How is it possible, that the gold rate at one moment is low, while at another moment it reaches record heights? Several factors are involved.
The price of gold is also referred to as the gold rate. The gold rate represents a certain price used to buy and sell gold. The gold rate is most often expressed in American dollars and the American weight unit ‘troy ounce’. One troy ounce equals 31,103 gram. A lot of golden coins contain exactly 1 troy ounce of gold. There is not one universal gold rate! The Kitco-rate is a goldrate which can be tracked by anyone. The rate is expressed in dollars & euro’s and is updated constantly. The Reuters gold rate is a rate only visible for a handful of leading corporations. This is the rate used by the biggest banks and gold melting houses.
Demand & supply
The most important factor that influences the gold price, is the supply & demand of gold. The more demand for gold, the higher the price will become. The demand is influenced by banks and traders. If they show a growing demand, the price will automatically go up. When suddenly a lot of gold enters the market or new gold is found, the price will decrease. Not a lot of new gold is entering the market anymore. Less and less new gold sources are discovered. Also the costs of mining and producing have increased.
The demand for gold is an economical situation in essence. It’s common people resort to gold when the economical sitution is worsening. Gold always will maintain a certain trustworthy value. In economically bad times, there is a lot of demand to gold and the gold price will actually rice. This same effect is visible when there is political turmoil. Against political turmoil, the stable factor of gold offers
Monetary Policy & Federal Reserve
The monetary policy determines the interest rates in this modern age. Interest rates influence the gold price. The interest is a small commission that investors get to take risks. However, a lot of interest rates are under the level of inflation. This means there is a negative real interest. With such negative real interest, it’s often safer to buy gold instead of losing money by taking risks. The Federal Reserve, as the biggest and most important bank in the world, has a big influence in interest rates. By making policy and sharing their view.