It is good news for those who are interested in buying gold coins for the price of gold is on the rise again; this time closing on an all-time high. Its price has been steadily rising over 10 consecutive years and it is expected to continue to rise this year.
With the gold price at more than $1,400/oz, it is quite close to a previous high of $1,421/oz.
Though gold price may fluctuate, its recent performance is indicative of long-term prospects investment.
US Dollar weaker
The performance of gold rises steadily due to the many disappointing US economic news figures; the weakened dollar has been hurt by global statements that the U.S. currency is not as attractive or ‘appetizing’ as before.
The US dollar has been, and currently is, the world’s reserve currency but gold tends to counter its prominence all the time. Gold has set itself to be the world’s currency major competitor and it is often referred to as the only real money.
China has surpassed Japan’s economy recently to take second spot with massive reserves in foreign currencies. China's reserves over the years were built on the US dollar but now a turnaround spells bad news for the greenback.
That in turn benefits gold as its price tends to move in opposite direction of the greenback. Gold owners are the major beneficiaries in this course of event. But it is not just the dollar’s decline that has buoyed the price of gold; there are other factors affecting the US economy.
High Unemployment
The increased unemployment rate in the US is now around 10%, despite the large stimulus package announced by the US government. This rate has become the country’s highest in a long time. The financial markets are concerned over this figure which does not augur well for the economy, since much of the country’s work force is sitting idle. With persistent unemployment occurring, analysts are starting to call the situation ‘depression’. Hence people are driven towards gold, the safer haven.
The troubled real estate market also caused the gold price to rise. Real estate is traditionally regarded as an alternative to stocks and bonds which are paper assets, and a cover against inflation.
Ailing Real Estate
However, even the real estate market performed badly over the past two years; many Americans lost big bucks in real estate instead of having shelter from alternative assets. Their wealth fizzled out in the financial crisis caused by the recent subprime mortgage fiasco that rocked the stock market. Now, everyone stands alert to a paradigm shift when it comes to real estate and stocks.
It is not true anymore that real estate is independent of the stock market as both environments declined with the same factors. Hence, more people are turning to gold, especially gold coins. These are more affordable, convenient, portable and readily liquid.
Financial markets will remain a concern with Americans seeking solace and safety with the uncertain U.S. economy. Gold prices are expected to climb in such situations.
Showing posts with label gold prices. Show all posts
Showing posts with label gold prices. Show all posts
Wednesday, February 9, 2011
Monday, January 10, 2011
How Current Gold and Silver Prices Are Determined
Precious metals are constantly traded; their markets are so active that it may seem that there is no pause in its trading activities. With the different time zones, it is not surprising for gold and silver to be traded 24x7 in various international bourses and financial exchanges.
It is the market activity that determines the gold and silver prices which may go up or down. The basic supply and demand factors are the main contributors to these metals’ daily prices.
Demand for gold
There are 3 main sources that affect the price of gold and silver.
One, investment demand by an individual, organization or government can affect these precious metals’ pricing. Small or large investments can affect the said metals’ pricing easily depending on the trade demand.
Next, industrial demand of gold and silver affects their pricing easily as they have attractive properties suited for many industrial uses.
Thirdly, there is always the jewelery demand of gold and silver to be adorned or stored and passed on from generation to generation in Oriental cultures. Such high esteem of gold keeps its pricing buoyant.
Supply of gold and silver
However, the supply of gold and silver is not as dynamic as their demand. Supply is limited from the earth’s resources and difficult to source using expensive technology and tools. This causes gold and silver to be more valuable. It is estimated that the total amount of gold that can ever be sourced is only a 20 cubic yard.
And because these precious metals are scarce, their current owners are holding on to them tightly; hence, the value of gold and silver keep increasing making it a vicious cycle on its supply and demand value.
Another important source which can determine the value of gold and silver is the futures market. This arena holds the supply and demand level of these precious metals as this is where buyers and sellers of gold and silver trade actively on various commodities as well as financial derivatives.
Spot price
Futures prices of these precious metals can affect the spot price of a commodity, which is usually gold; a spot price of a commodity is the actual price that the commodity is agreed upon to be traded and delivered immediately.
A spot price of any commodity is the actual value of the commodity at that point in time which is usually traded in US currency. But today the trend is changing with the spot price being traded in other currencies like the European Euros, Chinese Yuan, Japanese yen, Australian dollars, Hong Kong and Canadian dollars.
It is the market activity that determines the gold and silver prices which may go up or down. The basic supply and demand factors are the main contributors to these metals’ daily prices.
Demand for gold
There are 3 main sources that affect the price of gold and silver.
One, investment demand by an individual, organization or government can affect these precious metals’ pricing. Small or large investments can affect the said metals’ pricing easily depending on the trade demand.
Next, industrial demand of gold and silver affects their pricing easily as they have attractive properties suited for many industrial uses.
Thirdly, there is always the jewelery demand of gold and silver to be adorned or stored and passed on from generation to generation in Oriental cultures. Such high esteem of gold keeps its pricing buoyant.
Supply of gold and silver
However, the supply of gold and silver is not as dynamic as their demand. Supply is limited from the earth’s resources and difficult to source using expensive technology and tools. This causes gold and silver to be more valuable. It is estimated that the total amount of gold that can ever be sourced is only a 20 cubic yard.
And because these precious metals are scarce, their current owners are holding on to them tightly; hence, the value of gold and silver keep increasing making it a vicious cycle on its supply and demand value.
Another important source which can determine the value of gold and silver is the futures market. This arena holds the supply and demand level of these precious metals as this is where buyers and sellers of gold and silver trade actively on various commodities as well as financial derivatives.
Spot price
Futures prices of these precious metals can affect the spot price of a commodity, which is usually gold; a spot price of a commodity is the actual price that the commodity is agreed upon to be traded and delivered immediately.
A spot price of any commodity is the actual value of the commodity at that point in time which is usually traded in US currency. But today the trend is changing with the spot price being traded in other currencies like the European Euros, Chinese Yuan, Japanese yen, Australian dollars, Hong Kong and Canadian dollars.
Monday, August 30, 2010
Korea Feals Pressure to Add Gold to Foreign Exchange Reserves
According to BNP Paribas Asset Management, the Bank of Korea which has yet to start buying gold is under enormous pressure to start adding gold to its foreign exchange reserves.
The increase in pressure comes from other countries like India, Russia, and China who have bought gold as a defense for currencies reserves. Last year the head of Korea's reserve management unit though gold to be of little value though with uncertain times increasing for financial markets that opinion is changing fast. Currently, Korea is 56th on gold holdings in the work according to World Gold Council.
As signs of a financial recovery are looking more bleak, gold prices are continuing to stay strong near their record high. With falling prices in both the dollar and euro there are not many options for Korea that are not adding physical gold to their foreign exchange reserves.
On August 26th gold traded for $1,239.70 and is up for looks to be its 10 year in a row.
South Korea is the 6th largest foreign exchange reserve in thw world with only 0.03% of their $286 billion in gold. China, Japan, Russia, Taiwan, and India are the top 5 foreign exchange reserves in order. Estimates are that Korea's' gold position is the smallest percentage of any of the top 100 foreign exchange reserve holders.
With fears surfacing of a double dip recession, Goldman Sachs forecasted that gold may exceed $1,300 with in the next 6 months.
Other foreign exchange reserves like Russia added 50000 ounces of gold in the last month increasing their total to 23.3 million ounces.
The euro has lost 12% of its value to the dollar in 2010 which is another set of economic news sending investors and countries to gold. Gold coins have been used in theory as a safe haven as they have never had a value of zero.
The increase in pressure comes from other countries like India, Russia, and China who have bought gold as a defense for currencies reserves. Last year the head of Korea's reserve management unit though gold to be of little value though with uncertain times increasing for financial markets that opinion is changing fast. Currently, Korea is 56th on gold holdings in the work according to World Gold Council.
As signs of a financial recovery are looking more bleak, gold prices are continuing to stay strong near their record high. With falling prices in both the dollar and euro there are not many options for Korea that are not adding physical gold to their foreign exchange reserves.
On August 26th gold traded for $1,239.70 and is up for looks to be its 10 year in a row.
South Korea is the 6th largest foreign exchange reserve in thw world with only 0.03% of their $286 billion in gold. China, Japan, Russia, Taiwan, and India are the top 5 foreign exchange reserves in order. Estimates are that Korea's' gold position is the smallest percentage of any of the top 100 foreign exchange reserve holders.
With fears surfacing of a double dip recession, Goldman Sachs forecasted that gold may exceed $1,300 with in the next 6 months.
Other foreign exchange reserves like Russia added 50000 ounces of gold in the last month increasing their total to 23.3 million ounces.
The euro has lost 12% of its value to the dollar in 2010 which is another set of economic news sending investors and countries to gold. Gold coins have been used in theory as a safe haven as they have never had a value of zero.
Tuesday, June 29, 2010
Surging Gold: Coins in High Demand
After a brief lull, gold is fast regaining its popularity as the choicest investment option, especially in the trying times. The metal proved to be the best alternative to the volatile paper currency at the time of economic downturns. During the global recession of 2008, gold surged to record highs as the investors the world over began converting their cash holdings into the yellow metal. As the world economy seemed to be returning to normalcy, the commodity witnessed price correction, more significantly from December 2009 onwards. However, with the progress of the Fiscal Year 2010, the news of the Euro Zone Crisis started pouring in and acting as a major damper to the already shaky market sentiments. The fears of a second round of troubles gave a fresh boost to the gold demand in all forms, including coins.
The European sovereign debt crisis has made gold bullion particularly sought-after in Europe. The South African gold coin Krugerrand is currently enjoying higher valuation of the Canadian bullion, Gold Maple leaf. Meanwhile, the premium on the British bullion, Gold Sovereign is accelerating by the day. However, rooting to the concerns over the Euro Zone crisis, the rest of the world economy has made global investors wary of the foreign exchange rates moving against their home currencies. The sharp rise in the demand for the United States Gold Eagles is a proof of the sagging market view. The US bullion deliveries in the month of May 2010 shot up to double on a year-on-year basis. The US is also plagued by its own slow recovery and rising national debt, which has touched the unprecedented levels. The figure is estimated to be over $13 trillion!
The exact implication of the Greece-led instability is still a matter of debate, with conflicting news and opinions coming up often. Though the gold prices remain high, the uncertainty is making the investors wary of offloading their bullion inventories. However, in an interesting development, a member of the United States House of Representatives Anthony David Weiner from New York has accused Goldline Inc. of artificially promoting the demand for the American Eagles. In a statement from his office, the company is defined as “aggressive sales tactics, conservative spokespeople and rhetoric to sell over-priced gold coins to unsuspecting consumers.” It is hard to ascertain the proportion of the total coin demand so created and what comes out of the political roe over the issue. Meanwhile, the demand for BU and Mint State 20 cents is also picking up, such that much of the earlier price correction has already been covered.
The European sovereign debt crisis has made gold bullion particularly sought-after in Europe. The South African gold coin Krugerrand is currently enjoying higher valuation of the Canadian bullion, Gold Maple leaf. Meanwhile, the premium on the British bullion, Gold Sovereign is accelerating by the day. However, rooting to the concerns over the Euro Zone crisis, the rest of the world economy has made global investors wary of the foreign exchange rates moving against their home currencies. The sharp rise in the demand for the United States Gold Eagles is a proof of the sagging market view. The US bullion deliveries in the month of May 2010 shot up to double on a year-on-year basis. The US is also plagued by its own slow recovery and rising national debt, which has touched the unprecedented levels. The figure is estimated to be over $13 trillion!
The exact implication of the Greece-led instability is still a matter of debate, with conflicting news and opinions coming up often. Though the gold prices remain high, the uncertainty is making the investors wary of offloading their bullion inventories. However, in an interesting development, a member of the United States House of Representatives Anthony David Weiner from New York has accused Goldline Inc. of artificially promoting the demand for the American Eagles. In a statement from his office, the company is defined as “aggressive sales tactics, conservative spokespeople and rhetoric to sell over-priced gold coins to unsuspecting consumers.” It is hard to ascertain the proportion of the total coin demand so created and what comes out of the political roe over the issue. Meanwhile, the demand for BU and Mint State 20 cents is also picking up, such that much of the earlier price correction has already been covered.
Monday, June 21, 2010
Greece’s Rating Downgrade and the Impact on Gold Prices
The preliminary news of a brewing economic trouble in the Euro Zone began pouring in with the start of FY 2010. The problem that began with Greece, gripped Spain and Portugal as well, jeopardizing the future of Euro, one of the best paper currency alternatives to the US Dollar. The sovereign debt of these nations reached to alarming levels, much higher than their GDPs. The next blow came as Greece requested an EU/IMF sponsored bailout package in April 2010, followed by a credit rating downgrade by Standard & Poor. The debt rating of Greece was reduced to BB+ (non-investment grade) on April 27, 2010.
The industry watchers remain divided on the exact impact of the crisis, yet everyone agrees that any sovereign credit default is likely to destabilize an already slow world economy. As the bailout package is being formulated, another leading agency, Moody’s Investor Service pegged Greece’s rating to Ba1 (junk), down four notches on June 14, 2010. While this has instigated a lot of furor with the European Union expressing a ‘surprise’ over the move, the investors and speculators seem to have taken a different beat. A key fact in the case is that the national debt of the United States has also reached at historic levels, crossing $13 trillion. As a tumbling Euro has lost much of its attraction as an alternative to a weakening Dollar, the traditional preferred commodity gold has regained its sheen.
Much on the similar lines as during the global meltdown of 2008, the investors at various levels have started switching to the yellow metal, as an effective hedge against any further destabilization in the world economy. Apart from the panic-driven consumer demand, the market for speculative positions is also heating up. There is a large section of experts, who have faith in the EU/IMF rescue package for Greece. However, an equally sizable number, including the credit rating agencies, believes that there is a strong probability of administrative issues and implementation risks inherent in the program. Last week has been a witness of the wavering market sentiments, where gold touched the record price of $1,251.20 before reaching $1,214.
Moody’s latest action reflected in the gold spot that hovered around $1,226.95 on Monday. The August delivery futures jumped approximately $5 to reach $1,299.10. ScotiaMocatta of Scotiabank Group expects that after consolidating around the current levels, gold is expected to reach new highs in the coming days. Meanwhile, another leading agency Fitch has clarified that it is not contemplating a rating downgrade for the ailing country, in the near future.
The industry watchers remain divided on the exact impact of the crisis, yet everyone agrees that any sovereign credit default is likely to destabilize an already slow world economy. As the bailout package is being formulated, another leading agency, Moody’s Investor Service pegged Greece’s rating to Ba1 (junk), down four notches on June 14, 2010. While this has instigated a lot of furor with the European Union expressing a ‘surprise’ over the move, the investors and speculators seem to have taken a different beat. A key fact in the case is that the national debt of the United States has also reached at historic levels, crossing $13 trillion. As a tumbling Euro has lost much of its attraction as an alternative to a weakening Dollar, the traditional preferred commodity gold has regained its sheen.
Much on the similar lines as during the global meltdown of 2008, the investors at various levels have started switching to the yellow metal, as an effective hedge against any further destabilization in the world economy. Apart from the panic-driven consumer demand, the market for speculative positions is also heating up. There is a large section of experts, who have faith in the EU/IMF rescue package for Greece. However, an equally sizable number, including the credit rating agencies, believes that there is a strong probability of administrative issues and implementation risks inherent in the program. Last week has been a witness of the wavering market sentiments, where gold touched the record price of $1,251.20 before reaching $1,214.
Moody’s latest action reflected in the gold spot that hovered around $1,226.95 on Monday. The August delivery futures jumped approximately $5 to reach $1,299.10. ScotiaMocatta of Scotiabank Group expects that after consolidating around the current levels, gold is expected to reach new highs in the coming days. Meanwhile, another leading agency Fitch has clarified that it is not contemplating a rating downgrade for the ailing country, in the near future.
Thursday, June 3, 2010
Low Interest Rates May Allow Gold and Silver to Rise
With the Federal reserve most likely not changing the current fiscal policy, gold and silver prices may rise due to low interest rates allowing investors to buy precious metals as a hedge against inflation, according to Dave Rusate, GE Capital's managing director of foreign exchange and commodities.
"If the government doesn't raise interest rates, that allows hedge funds and other speculators who try to protect themselves from inflation to buy" (gold and silver), says Rusate.
For the ninth straight year gold futures have risen and are up already 11 percent this year. A new record was achieved in May 14 when gold hit $1,249.70 an ounce. Silver is also up on the year at around 25% in the last 12 months.
Rusate also states that platinum may have a nice jump in the next month as South Africa the world's largest platinum producer slows down production due to the World Cup. South Africa is the host country for the World Cup and electricity flowing to mining companies may be directed toward the event.
"If the government doesn't raise interest rates, that allows hedge funds and other speculators who try to protect themselves from inflation to buy" (gold and silver), says Rusate.
For the ninth straight year gold futures have risen and are up already 11 percent this year. A new record was achieved in May 14 when gold hit $1,249.70 an ounce. Silver is also up on the year at around 25% in the last 12 months.
Rusate also states that platinum may have a nice jump in the next month as South Africa the world's largest platinum producer slows down production due to the World Cup. South Africa is the host country for the World Cup and electricity flowing to mining companies may be directed toward the event.
Thursday, March 18, 2010
The Significance of Gold Price Forecasting
The recent global turmoil has reaffirmed the significance of gold as a safe and viable investment alternative. Other precious metals like platinum have not been able to take the position of gold, due to its high value and price volatility. In addition to retail investors, central banks, institutions, pension funds, etc. also take large positions in gold and drive its prices.
Why gold?
The one most apparent factor is that the lifetime returns on gold have been positive. Gold value is subject to short and medium-term fluctuations. However, it is not susceptible to the ups and downs of the economic and business cycles. This renders it a more stable investment in the long-term.
There is a negative correlation between the dollar rates and the gold prices. In the case of volatile market conditions or a weakening currency, people start replacing their dollar investments with gold. On one hand, this ensures that the investors do not lose their purchasing power by the day. On the other hand, the increased demand for gold pushes its prices up, augmenting the values of gold holdings. A weakening dollar is indicative of strengthening gold and vice-versa (this is mostly true, but not always).
Gold prices are not dependent upon the political or economic conditions. Events, like natural calamities, political disturbance, wartime etc. either do not affect gold value, or put an upward pressure on it. Therefore, in distress conditions gold acts as an effective hedging strategy to prevent the erosion in investor wealth.
Is gold always a ‘buy’?
Like stocks, investors often make a mistake of buying gold at a peak on the expectations of further price rise. Speculative gold trading has a large market and often the speculators accelerate the uptrend through futures and forwards. Such artificial price rally is liable to correction, sometimes leading to sudden plunge in value. Always remember the thumb rule to buy low and sell high.
Is jewelry worth the same as coin, bullion, or bars?
Jewelry yields lesser returns that the other forms due to the mixture of alloys, wear & tear, handling marks, and designing. In addition, gold jewelry is a costly acquisition because of its processing charges.
How to ensure right decisions?
Acquiring gold calls for more than intuition and tracking the mass sentiments. Guidance from expert precious metals consultants, newspapers, trade journals, investment websites, authentic investing forums, etc. are some of the reference points for making informed decisions.
Why gold?
The one most apparent factor is that the lifetime returns on gold have been positive. Gold value is subject to short and medium-term fluctuations. However, it is not susceptible to the ups and downs of the economic and business cycles. This renders it a more stable investment in the long-term.
There is a negative correlation between the dollar rates and the gold prices. In the case of volatile market conditions or a weakening currency, people start replacing their dollar investments with gold. On one hand, this ensures that the investors do not lose their purchasing power by the day. On the other hand, the increased demand for gold pushes its prices up, augmenting the values of gold holdings. A weakening dollar is indicative of strengthening gold and vice-versa (this is mostly true, but not always).
Gold prices are not dependent upon the political or economic conditions. Events, like natural calamities, political disturbance, wartime etc. either do not affect gold value, or put an upward pressure on it. Therefore, in distress conditions gold acts as an effective hedging strategy to prevent the erosion in investor wealth.
Is gold always a ‘buy’?
Like stocks, investors often make a mistake of buying gold at a peak on the expectations of further price rise. Speculative gold trading has a large market and often the speculators accelerate the uptrend through futures and forwards. Such artificial price rally is liable to correction, sometimes leading to sudden plunge in value. Always remember the thumb rule to buy low and sell high.
Is jewelry worth the same as coin, bullion, or bars?
Jewelry yields lesser returns that the other forms due to the mixture of alloys, wear & tear, handling marks, and designing. In addition, gold jewelry is a costly acquisition because of its processing charges.
How to ensure right decisions?
Acquiring gold calls for more than intuition and tracking the mass sentiments. Guidance from expert precious metals consultants, newspapers, trade journals, investment websites, authentic investing forums, etc. are some of the reference points for making informed decisions.
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