Investing in gold bullion and the price of gold

 Gold is one of the most popular commodities in the world to trade and invest in. It is bought and sold as a safety net against political and economic influencers, including social crises and the collapse of the regime. Compared to currency, the value of gold bars is quite stable with relatively minor fluctuations. There are several factors that can influence the gold price and supply and demand play an important role.

 Annual production plays a small role in how the price of gold bars changes. This is because the amount of gold stored is high compared to the amount of new gold mined each year. The World Gold Council has estimated that the total amount of gold mined annually in recent years has been 2,500 tons, with 2,000 of that going into the production of jewelry and dental / industrial products. That leaves 500 tons for retail investors and commercial funds. It has been estimated that there is demand for another 1000 tonnes of gold bullion for investment purposes.

 The success of investing in gold bullion is highly dependent on the world's major central banks and the International Monetary Fund, as they play a significant role in price. of gold. In 2004 central banks and other official organizations held 19% of all ground gold as official reserves, and are restricted to the amount of gold they can sell Washington Gold Agreement (WAG). WAG member states include the United States, Europe, Japan, Australia, the Bank for International Settlements, and the International Monetary Fund. They are prohibited from selling more than 400 tons of gold each year, limiting the amount of gold available to independent investors.

 China and Russia, which are not members of WAG, have shown interest in increasing their gold reserves, which has added another competitor to the gold bullion investment market.

 What really influences the price of gold in the market can be separated into three main factors; bank failures, low or negative real interest rates and social / political crisis.

 When banks fail in the eyes of the public, there can be bank runs across the country, in which citizens quickly remove all their savings from the bank. When citizens take gold from banks, this can lead to the price of gold rising, as people worry that the value of paper money is worth nothing

 Demand for gold and other investment commodities increases when investment returns in the form of stocks, shares, and real estate are not worth the risk.

 There are several examples from history when the price of gold has skyrocketed in times of national crisis. The fear that currency will become useless or property will be seized leads to high demands for gold, because people always see sell gold as a way to buy food or escape.

 So now you have an idea of ​​how the price of gold is influenced, and that in times of bad economic fortune, gold often increases in value. So we've seen gold rise to over $ 1000 per ounce during the worst recession in three decades.