Gold symbolizes wealth. This chemical element is a shiny, dense, malleable and ductile metal. The physical appearance is luster yellow color. Gold is the commonly used metal in making coins and jewelry. It is believed to be the basis of monetary policies throughout human history. It was only in the late 20th century that it was supplanted by fiat currency or value as imposed by law.
Gold has always been one of the most sought after metals for so many generations. The amount of gold a person possesses signifies how powerful he is. A nation's reserve of gold signifies how powerful its economy is.
Gold investment in the past years has grown dramatically. Because of its current value, it remains a highly attractive investment. With the current trend of its price running up, it is becoming a hot commodity. It is also considered as the safest harbor in the investment market. Gold is traded in dozens of markets around the world almost every day. Along with this comes the continuous fluctuation and change in the gold price. For novice investors, this rise and fall of price of gold may be a bit confusing. Thus, it is imperative to understand the physics of the gold market.
The common factor that influences changes in the gold price is supply and demand. This can happen when one major world bank will announce that they are going to reduce their gold reserves. The effect is to plunge the gold price into a higher value. This can also happen when mining companies do forward sales when supply of gold rises. While the company can secure the mine output price at an exceptionally attractive price, the effect is to decline the value of gold in the world market.
Another factor that influence gold price is the global economic condition. The jewelry industry is the market that demands the most of gold supply. But this industry is highly sensitive to the effects of recession. As the world continuously experiencing recession, the jewelry market continues to fail on its demands for gold. In effect, the price of gold continues to decline.
World's political condition is a strong influence on the fluctuation of gold prices. World situation such as the attack of US against Iraq caused many participants in the world market to shift their investment from money and stocks to gold investments. This affected not only the economies of those involved, but also those who are not. The investors again seek for a safer harbor. The effect is for gold demands to fluctuate.
Bank failures contribute to the ever changing price of gold. When banks demonstrate financial stability, the investors flock to convert their monetary investments to safer harbor of gold investment. This forces pressure the price of gold to rise.
Another factor that influences the price of gold is the change of exchange rates. If the exchange rate is lower, the people tend to buy gold hoping that this could better protect the value of their assets. When the value of currencies continues to decline, there will be a continuous rise in the value of gold.
With these influences that change the gold price, the gold market has a spread of gold bottlenecks and actual shortages.
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