Gold Price is Shrouded in Mystery!
What is the true gold price? This is a question that’s difficult to answer simply. There are various prices quoted, depending on whether you are seeking the cost of gold jewelry or the gold price paid by gold dealers, and where in the world you are asking the question. Keep in mind that most governments have laws regulating every aspect of gold trading.
Obviously, the highest gold price is paid when we buy gold coins or jewelry at retail. Banks and other large institutions pay the wholesale gold price, a price that is only available on single transactions of 400 ounces (or more) of gold.
If you are thinking of becoming involved in the gold trade, by all means, first find out specific details from the US Federal Reserve Board. It is a complicated business, and a seemingly attractive current gold price should not be your only incentive to becoming a “self-server.” You will definitely do better if you leave the buying and selling to the people who specialize in gold trading!
Don’t think that all those retail jewelry shop owners, coin sellers, processors of dental gold, electronics companies, photographic processors, and small investors are gold dealers in their spare time. They go to a licensed, experienced gold dealer, or to their bank. There are plenty of people who spend virtually all their time in following the rise and fall of the gold price worldwide. Since there are so many variables that contribute to that price, it makes sense to depend on the opinions and advice of these professionals.
They’ll let you know whether the gold price will be remaining steady, rising, or falling in the near future, and you can plan your investing accordingly.
Even these experts, however, cannot always foresee world developments that can have a significant effect on what happens to the gold price. National political events, international situations, tensions escalating around the world: all these can cause instant and unforeseen changes in the demand for gold and the gold price. Lack of confidence in our currency is easy to understand, when you look at its deflation and the growing strength of the Euro in opposition.
It has always been true, historically and today as well: when the general public loses confidence in the economy, based on the way it is being managed by the government, their confidence in our paper-and-plastic-based monetary system will also wane. And then there is inflation to be considered… It’s no wonder that people turn back to the security and durability of gold!
But we still have not answered that question, “What is the true gold price?” When you hear a gold price quoted, most likely you are hearing the London PM Fix. Five Market Making members of the London Bullion Market Association (one each in Canada, the UK, the USA, Germany, and France) confer by telephone daily at mid-morning and mid-afternoon to “fix” the price of gold, silver, platinum, and palladium. These fixings are internationally published, and are considered benchmarks for these four precious metals. You’ll note that US dollars are used to quote the fixed prices. If other currencies are quoted, the current Foreign Exchange rate (or “forex rate”) is used to convert the price into the local unit of currency.
There’s a good reason why the gold traders provide statistical charts indexing the gold price in US dollars, and also include exchange rates for currencies used by other countries. The gold price is certainly largely based upon its intrinsic value, because of its beauty, malleability, durability, and other characteristics that have been recognized for centuries. In addition, what you pay for this precious metal reflects relative strengths of those currencies for which quotes are given.
Money is an important matter to think of whether you get involved in gold trade or anything else. Who on earth would willingly pay a large amount of money for something that can be found at a better price somewhere else? Trying to understand gold prices is one of the most important steps one should take before starting to do this kind of business.
You must be logged in to post a comment.