The Basic Fundamentals Of Gold

If you plan to buy gold coins, it is important that you have a clear understanding of the gold market. The gold market is the one that mainly dictates the price and movement of gold. The specific factors that affect the price of gold are supply and demand.

The supply of gold is normally low. Gold has been mined since the ancient times which contribute to its scarcity. Another factor is that gold nuggets are not just picked up from the ground like pebbles. They have to be mined several hundred feet below the ground. Out of ten tons of ore, you can only get an ounce of gold. A lot of men have searched for their fortunes in gold but only a few have succeeded. The short supply of gold has made it even more valuable. There are gold mines all over the world but the demand for gold currently surpasses the supply that is available. The most productive mines in the world are in the United States, Russia, Australia and South Africa.

Freshly mined gold is not the sole source of the world’s gold supply. The gold that has been mined many years ago can still be used. Gold is a lasting and precious mineral. It can last forever and can be used over and over again.

One of the sources of existing gold is the official reserves of the government as well as private organizations. These gold reserves have been sold over the years and it was expected to stabilize or even lower the price of gold but that never happened. In the late 1990s, the Bank of England sold their gold reserves at $300 per ounce. After they have sold their gold reserves, the price of gold in the market more than tripled. The International Monetary Fund or the IMF sold off part of their gold reserves at the same time the Bank of England did. Financial institutions cannot even predict the right timing in selling their gold.

The supply may be low but the demand for gold has always been high. One major cause for the high demand for gold in the market is the jewellery-making industry. Gold jewellery is very much in demand in Asian countries such as China and India. Gold jewellery is not only a precious accessory in these Asian countries but they are also considered as a medium for trade. In the Western countries, gold jewellery is acquired for its value and beauty.

Gold is very strong, malleable and is an excellent conductor of electricity which is why it is used as an industrial metal. It is used in making electrical and computer parts. They are also used as lining for the cockpits of modern military aircrafts.