What drives the price of gold?

[andala ramudu]

The ancient Egyptians performed the first smelting of gold circa 3,600 BC. A thousand years later, gold jewellery appeared as the goldsmiths of ancient Mesopotamia crafted a burial headdress made of lapis, carnelian beads and leaf-shaped gold pendants.

Since these early days, mankind has been fascinated by gold, and the desire to own it has led to great gold rushes and to wars: King Ferdinand of Spain declared in 1511: "Get gold, humanely if you can, but at all hazards, get gold!"

Today, gold is sought after not only for investment purposes and a strong jewellery market, but it is also used in the manufacturing of certain electronic and medical devices. Gold (as of March, 2011) cost around $1,420 an ounce (£873) and hitting record highs. What factors drive the price of this precious metal?

Central bank reserves

Central banks hold paper currencies and gold in reserve. The World Gold Council has stated that central banks have recently begun buying more gold than they are selling, the first time this has happened in decades.

As the central banks diversify their monetary reserves - away from the paper currencies they've accumulated and into gold - the price of gold rises. Many of the world's nations have reserves that are composed primarily of gold, including the United States, Germany, Italy, France, Portugal, Greece and the euro area.

Value of the US dollar

The price of gold is generally inversely related to the value of the United States dollar: A stronger US dollar tends to keep the price of gold lower and more controlled; a weaker US dollar is likely to drive the price of gold higher.

This is because people have a tendency to invest and trade in dollars when the dollar is strong. During times of economic uncertainty and when the dollar is weak, however, people prefer to invest in gold, through vehicles such as gold funds or coins.

Worldwide jewellery and industrial demand

In 2010, jewellery accounted for approximately 54% of gold demand, which totalled 3,812 tonnes, according to the World Gold Council and The London Bullion Market Association.

India, China and the United States are the largest consumers of gold for jewellery in terms of volume. Consumer demand in China, for example, for the first two months of 2011 reached 200 tonnes - a huge increase over the previous year, which took 10 months to reach 209 tonnes.

Another 12% of demand is attributed to medical and industrial uses for gold, where it is used in the manufacturing of medical devices like stents and precision electronics like GPS units. Gold prices can be affected by the basic theory of supply and demand: As demand for consumer goods such as jewellery and electronics increase, the cost of gold can rise.

Wealth protection

During times of economic uncertainty, as seen during the recession of the late 2000s, more people turn to investing in gold because of its enduring value.

Gold is often considered a "safe haven" for investors during uncertain times. When the expected or actual returns on bonds, equities and real estate fall, the interest in gold investing increases, driving up its price.

Gold can be used as a hedge against currency devaluation, inflation or deflation. In addition, gold is viewed as providing protection from political instability, as evidenced by the recent unrest in the Middle East and North Africa, which may be partly responsible for gold's recent rally to new highs.

Gold production

Major players in worldwide gold mining include China, South Africa, the United States, Australia, the Russian Federation and Peru.

The world's gold production affects the price of gold, another example of supply and demand. Gold mine production increased by about 3% in 2010 to about 2,652 tonnes, according to GFMS, as several new large-scale mines began operations.

Despite this small increase, however, gold mine production has been in a decline since the early 2000s. One factor is that all the "easy gold" has already been mined; miners now have to dig deeper to access quality gold reserves.

The fact that gold is more challenging to access raises additional problems: The miners are exposed to additional hazards and the environmental impact is heightened. In short, it costs more to get less gold. These add to the costs of gold mine production, resulting in rising gold prices.

The bottom line

We have long been, and will likely continue to be, enamoured by gold. The recent recession has stirred a modern day gold rush.

The demand for gold, the amount of gold in the central banks' reserves, the value of the US dollar and the desire to hold gold as a hedge against inflation and currency devaluation, all help drive the price of gold, one of the world's precious metals.
[img]http://globalfinance.zenfs.com/images/UK_AHTTP_YAHOO_FINANCE_LIVE1/gold4_small.jpg[/img]

[manmadudhu]

katte kotte teche annatuu seppu ba......atu fost lo amayini susi....entha pedha dhi sadavalenu.....neekosam mundhe  *=: *=:

[andala ramudu]

[quote author=manmadudhu link=topic=167432.msg2020209#msg2020209 date=1300097083]
katte kotte teche annatuu seppu ba......atu fost lo amayini susi....entha pedha dhi sadavalenu.....neekosam mundhe  *=: *=:
[/quote]nenu sadavaledu mama  @3$% @3$% @3$%

[manmadudhu]

[img]http://i47.tinypic.com/s3nar4.jpg[/img] sadavakunda fost estava.............naaa  *=: naaaku echey........

[andala ramudu]

*7*^ *7*^ *7*^[quote author=manmadudhu link=topic=167432.msg2020214#msg2020214 date=1300097264]
[img]http://i47.tinypic.com/s3nar4.jpg[/img] sadavakunda fost estava.............naaa  *=: naaaku echey........
[/quote]

[manmadudhu]

[quote author=andala ramudu link=topic=167432.msg2020215#msg2020215 date=1300097341]
*7*^ *7*^ *7*^
[/quote]

endhi mama inka avaru lera.....manaki maname fostlu vesukuni refly lu echukuntunam......... @3$% @3$%

[andala ramudu]

[quote author=manmadudhu link=topic=167432.msg2020217#msg2020217 date=1300097393]
endhi mama inka avaru lera.....manaki maname fostlu vesukuni refly lu echukuntunam......... @3$% @3$%
[/quote]adhe nenu  sCo_hmmthink sCo_hmmthink ee time ki UK janaba undali BTW nu ekkada mama  sHa_fr1ends sHa_fr1ends

[manmadudhu]

[quote author=andala ramudu link=topic=167432.msg2020225#msg2020225 date=1300097521]
adhe nenu  sCo_hmmthink sCo_hmmthink ee time ki UK janaba undali BTW nu ekkada mama  sHa_fr1ends sHa_fr1ends
[/quote]

nenu india mama.....evala fani faata ledhu.....kaaali...... @3$% @3$%

[andala ramudu]

[quote author=manmadudhu link=topic=167432.msg2020230#msg2020230 date=1300097641]
nenu india mama.....evala fani faata ledhu.....kaaali...... @3$% @3$%
[/quote]ohh india lo ekkada mama  sHa_fr1ends sHa_fr1ends

[manmadudhu]

[quote author=andala ramudu link=topic=167432.msg2020244#msg2020244 date=1300097848]
ohh india lo ekkada mama  sHa_fr1ends sHa_fr1ends
[/quote]

delhi lo working mama.............. sHa_fr1ends sHa_fr1ends

[andala ramudu]

[quote author=manmadudhu link=topic=167432.msg2020259#msg2020259 date=1300098120]
delhi lo working mama.............. sHa_fr1ends sHa_fr1ends
[/quote]mari monna ammai chunni wheel lo padindi ani chepthe nee yabba ani tittindi annav  sCo_hmmthink sCo_hmmthink

[manmadudhu]

[quote author=andala ramudu link=topic=167432.msg2020263#msg2020263 date=1300098199]
mari monna ammai chunni wheel lo padindi ani chepthe nee yabba ani tittindi annav  sCo_hmmthink sCo_hmmthink
[/quote]

evale vacha baa.....vacation ki vizag vellinapudu jarigindhi adhi........

[andala ramudu]

[quote author=manmadudhu link=topic=167432.msg2020266#msg2020266 date=1300098275]
evale vacha baa.....vacation ki vizag vellinapudu jarigindhi adhi........
[/quote]vacation aa [img]http://www.imageping.com/out.php/i24683_NBKDRUMS.gif[/img] baaga njoy sesava

[manmadudhu]

[quote author=andala ramudu link=topic=167432.msg2020272#msg2020272 date=1300098393]
vacation aa [img]http://www.imageping.com/out.php/i24683_NBKDRUMS.gif[/img] baaga njoy sesava
[/quote]

em enjoyment ooo baa......one week, one day la gadichipoindhi..............kaani parvaledhu edho chinna refreshment ante,........

[andala ramudu]

sHa_fr1ends sHa_fr1ends[quote author=manmadudhu link=topic=167432.msg2020277#msg2020277 date=1300098485]
em enjoyment ooo baa......one week, one day la gadichipoindhi..............kaani parvaledhu edho chinna refreshment ante,........
[/quote]