As an investor or probable commodities investor, appreciating the elements that regulate gold and silver prices is critical if you want to break a return. There are many elements that impact these prices and I address three crucial ones, namely Supply and Demand, the political economy and the value of the U.S. currency.
In times of global economic crisis, whenever markets are precarious, Gold & silver are oftentimes thought of as key investments. Commencing from roughly the mid 90's the gold & silver prices have ascended upward a constant trend. Such a steady unfaltering rise in monetory value caused more dealers and investors to buy such precious metals as Gold and Silver. Those that bonded their funds or earnings on these metals have reaped large benefits as the spot silver price and that of Gold has steadily grown. As the economies sunk into the worst recession since the great depression, gold & silver prices peaked against all odds reaching a new all time high.To really understant the propotions of what i am talking of, you need to look at the current price of silver per ounce (altho over the last couple of weeks, this had been ensnared in a closed trading space between $35 and forty-two dollars per ounce) vs the historical prices.
Thus if Gold & Silver prices have held their place over time, the greatest wonder that begs to resolve then is what in reality impacts these prices?. I will look at 3 cardinal ingredients that shape these prices.
1. In economic terms, the single major determinant of any product is demand and supply. Gold & Silver prices are contingent to these factors. Investing in these commodities is definately a logical and considered act, altho it does come with a big hazzard!. WHY is this so? Well because a lot of investors realise the profitability in holding gold or silver, its demand is really high, therefore the spot price silver or gold swings daily due to the huge demand and later handled volumes.
2. Political events. Things like war, growing country deficits and geo-political upheavals have effect on gold & silver prices. The grounds for this is elementary, in periods like this, many investors rush to invest in gold and silver to maintain the worth of their income, therefore again pushing demand, while supply holds still or actually slumps. The events presently playing in the Libya, Tunisia, Iraq today etc are all determining price of gold and silver prices today. In essence gold and silver are worldwide reserved currency of the world. Therefore, if anything goes on around the globe therefore it surely affects the gold and silver price.
3. The last element i will blog about in short is the relationship between the the gold & silver prices and the value of the American dollar. In the economic market the price of the precious commodities is influenced by the economic value of US $. This is wherefore whenever the value of U.S. dollar goes down, metal prices goes up and vice versa. Once the value of American $ goes down then commodities become cheaper for the investors, which induce the buying and raises the price of gold and silver.
Thus if Gold & Silver prices have held their place over time, the greatest wonder that begs to resolve then is what in reality impacts these prices?. I will look at 3 cardinal ingredients that shape these prices.
1. In economic terms, the single major determinant of any product is demand and supply. Gold & Silver prices are contingent to these factors. Investing in these commodities is definately a logical and considered act, altho it does come with a big hazzard!. WHY is this so? Well because a lot of investors realise the profitability in holding gold or silver, its demand is really high, therefore the spot price silver or gold swings daily due to the huge demand and later handled volumes.
2. Political events. Things like war, growing country deficits and geo-political upheavals have effect on gold & silver prices. The grounds for this is elementary, in periods like this, many investors rush to invest in gold and silver to maintain the worth of their income, therefore again pushing demand, while supply holds still or actually slumps. The events presently playing in the Libya, Tunisia, Iraq today etc are all determining price of gold and silver prices today. In essence gold and silver are worldwide reserved currency of the world. Therefore, if anything goes on around the globe therefore it surely affects the gold and silver price.
3. The last element i will blog about in short is the relationship between the the gold & silver prices and the value of the American dollar. In the economic market the price of the precious commodities is influenced by the economic value of US $. This is wherefore whenever the value of U.S. dollar goes down, metal prices goes up and vice versa. Once the value of American $ goes down then commodities become cheaper for the investors, which induce the buying and raises the price of gold and silver.
In summary i urge you to watch this awesome video on the same topic. Its very short and to the point! Enjoy.
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