Why Do Gold Rates Keep on Changing?

These days gold is not only the most sought after for investment purposes and also for the jewelry market, but it is also used for manufacturing of certain medical devices and electronic devices. There are many factors that drive the change of rates of this precious metal.

The Central bank reserves

The Central bank holds paper currencies and also gold in its reserve. Also the world gold council has stated that all central banks have recently begun purchasing more gold than they might be selling. As all central banks have diversified their monetary reserves, away from the paper currencies, they have accumulated and into gold, the prices of gold have continued to rise.

The US Dollar value

The price of gold is mostly invested based on the US dollar value. This means that a strong US dollar means that the price of gold will be more controlled and also be kept at a lower rate. Also a weaker US dollar is likely to drive the price of gold much higher. This is mainly because most people have a tendency to trade in dollars and also invest when the dollar is strong.

Worldwide demand of jewelry

In a survey done in 2010, the jewelry had accounted for approximately 54% of gold demand, and this totaled to around 3,812 tons. The United States, China and India are the largest consumers of gold for jewelry in terms of its volume. Also the consumer demand in China has reached 200 tons and this is a huge increase compared to last year. Also the gold prices can be affected by the basic theory of demand and supply, as the demand for a consumer goods such as electronic and jewelry increases, the cost of god can also rise significantly.

Wealth protection

During the times of economic uncertainty just as it has been seen during recession, more people have turned to investing in gold because of its very enduring value. Gold is also often considered to be a safe haven for investors during uncertain times. Also, when the actual and expected returns on bonds, real estate and equities, the interest in gold investing increases significantly and this is the reason for a shoot up in its price.

The recent recession has stirred a gold rush in the modern times. Even a TV show on this similar topic had garnered around 4 million viewers. It is one of the important things to remember.

Source by Urvi Tandon

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