The price of gold is often cited as being the standard upon which currency is based on even in the modern era in which this is not true. In the United States, for instance, it has not been a reality yet people believe that it is. In point of fact US currency used to be based on silver holdings as of 1792. Either way the price of gold, whether it is gold coins, bars, or other wise, and how it gains that price are a very interesting topic to many people. The most cited question about that price has usually been “How did it get to be worth that?”
Most people seem to somehow believe that there is a body of people that dictates the price, but in reality that body would be very large, a little over six billion individuals moving into the seven billion range. Every single individual on the planet determines the price of gold in some form or other minute to minute.
Traditionally the price to buy gold was set by governments with supposedly vast holdings in said metal that their currency was valued against. This was called the gold standard and it fell decades ago. The truth is that outside of the occasional government that tries to set the value of it in hard amounts, usually with a negative end result, this precious metal fluctuates in price based on the demands on the people that buy and sell gold.
It has become a good indicator of trust and faith in the wealth and stability of a nation. When the value of gold is low then people believe everything is ok. When people invest in gold by the truck load and it increases to an incredibly amount it simply means people have no faith in the economy.
Gold is both a bought and sold material and a catch all term for the fears of the masses. The value of gold is determined based on how much people want it. When cheap gold is bought in large amounts the value increases incredibly. When it is then subsequently sold during times that people feel are more economically stable it drops incredibly in worth.
Occasionally a government will set a hard price on gold or in the worst economic times they may proclaim a “gold seizure” wherein people can legally have their gold stripped from them for the supposed good of their country. This is a legal way for many countries to strip wealth from their citizens. To avoid this practice many individuals hoard gold and do not inform their governments of its existence. This practice varies in legality but it also affects the price to invest in gold. With less of it on the market people charge more for it so that they can earn a higher profit.
Gold coins, for instance, are often minted in the current economic age by countries that want to stabilize the value of gold and their currency. They can sell cheap gold or expensive gold at their discretion as a means of manufacturing some of the price of gold and thereby stabilizing the economy in some manner. Gold in and of itself has relatively little value outside of some industrial uses and jewelry.
By selling gold at a preset value this stabilize the price of gold and the amount of gold sold helps economists determine its rough value in comparison to the amount of it being recorded on the world market via physical sales as well as futures and options trading.
The truth is that “spot gold” is in and of itself a suggested guess at what the value of gold is. While it does change by the second in online trades it remains relatively the same except for these tiny incremental changes due to the nature of factoring in its necessary requirements to determine value. How much is being sold? How much is being bought? What prices it buy and sell for? How much was mined in the recent quarter? How much is suspected to be mined in the next quarter?
These all cross-correlate into the equation necessary to guess at what the value of gold is at any given moment.
Tags: gold prices, price of gold, spot gold, spot gold prices