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Gold is one of the top elements that is hard to place a price on. Since its value goes up and down so frequently, it is hard to pinpoint an exact price for something that is wanted by billions of people across the globe. Primarily, this substance is extremely important to Australia because the value of their currency depends on the continuously fluctuating price of gold.
There are several different factors that cause the gold price to rise and fall in this manner and some can be more significant than others. Below is a list of the 5 most popular reasons involved in the constant fluctuation of price.
Supply and Demand
For those who do not know, supply and demand is just a term we use to define the process of the rise and fall of the price for any sort of good or service. This is the exact same for gold. Gold is in high demand which means that the price will be higher because there is less of the supply. If there were more gold in supply, the price will be lower because there would be more to give out.
But, unfortunately, there will never be an oversupply of gold. The amount of gold only increased 1% in 2016 while the population increased by 1.2%. There is estimation that there is only .79 ounces of gold per human on earth.
Changes in Currency
Currency can change every day. It is something that not only impacts Australia but, it impacts the gold price the world over. However, Australia might be the most affected because the United States is mainly responsible for changing the price of gold. Again, Australian currency relies on the price of gold so it makes it hard to have a stable value on gold and just currency in general. However, the value of gold in the U.S. and Australia is typically the same.
Monetary Policy and Inflation
People choose to invest in gold over any other interest asset because they know that gold could have more of an advantage to them. Paper money goes down with inflation but, gold does not. For example, the consumer index fell 0.3% from 0.4% but, the price of gold still managed to climb high.
Gold Reserves and Products
The way that many banks operate today has drastically changed since the stock market crash in 2008. This is due to the fact that the U.S. has always had the majority of gold in their reserves and they never steadily increased their supply. As of recently, however, they have increased it. Europe and America are typically the main buyers of gold which is why they can keep their supply in their reserves built up. Gold is also one of the most desired elements in jewellery these days. Also, gold is one of the most used components of electronic devices. The more electronic devices that are desired means that there is more need for gold.
Political Crisis and Chaos
When global events happen, they can have a substantial impact on the value of gold because there is a lack of security with the government and financial institutions when countries go to war either with itself or other countries. This can make the price of gold rise extremely high.
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