The determinants of the gold market price have always been unique to this precious metal. Gold is used for a variety of purposes, ranging from an asset and an investment to a raw material and natural resource. It is also known to be the most reliable store of value and medium of exchange because it never loses value completely.
The widespread presence of gold in so many aspects of life means that the gold market will be different from the market for other commodities. The most prominent difference is the reaction of gold prices to various economic and political factors and their influence on the financial markets. For instance, hyperinflation causes paper money to lose value completely, so people rush to buy gold to preserve the value of their assets.
Factors that Influence the Gold Market Price
Other factors that influence the gold market price are geopolitical crisis and times of war. Sudden attacks such as the one that occurred on September 11th, 2001 can cause stock markets to perform very poorly for some time, and this leads to a massive rise in the value of gold. Another factor that may produce the same effect is currency crisis as this also interrupts in the proper functioning of the stock markets. Banking crisis also cause stock markets to experience downfalls; this in turn means that people turn to gold, as the safest store of value. Any factor that causes the stock market to perform poorly or disrupts its operations causes the gold market price to rise. There may be a few exceptions in the short run, but this relationship remains fixed over the long run.
Features of Gold Market
There are some features of the gold market that make it stand out from amongst other markets for commodities. There are several forms in which you can hold gold, such as bullion bars, wafers and coins, and some other forms. Gold can also be held in the physical form through possession of rare gold coins.
If you do not wish to hold physical gold, there are some ways in which you can hold it indirectly like Gold Stocks. For instance, some companies may become a part of the gold market by buying shares of other companies that mine or refine gold. On the other hand, this process may be carried out in the reverse direction as well. Some new methods have been introduced for owning gold, and all of these affect the gold market price. Buying and owning gold stocks is popular form of investment in today’s market.