There are plenty of ways in which you can put your funds for the investment purpose and one of them is the investment in the precious commodities. It includes gold, silver, oil, and other highly valuable materials. Globally, the price of these precious elements is increasing, and hence expert traders prefer putting their money into it. Among these, gold is most traded stock in the stock market throughout the world. Recently, there are reported issues that are linked with the gold and its investment. In this article, I am going to discuss all the major factors that are affecting the gold prices. The top of the list issue associated with the gold is its imbalance of demand and supply.
The story of imbalance:
As you know, the biggest holders are gold are the central banks, so they are actually affecting the demand and supply mechanism of gold. Banks have to keep a certain percentage of gold as reserves to issue currency notes. According to the detailed report of the world gold council, in 2003 a total of 33,000 metric tons of gold was stockpiled, which makes around 25% of the total gold ever mined. During the same year, a total of 3,200 metric tons of gold was flooded in the market. This shows that if the central bank sells what it has stored, then it could easily overwhelm the whole market. This huge compiled of gold under the central banks have created an imbalance of demand and supply of gold.
Will silver overtake gold in the future?
History shows that both silver and gold always moved together in the past. Currently, in the 20th century, silver has just lost its fame. In other words, silver has taken over by the gold. Now central banks are not considering silver as a source of their reserves, which helped in the decrease of inflation due to return on silver. History shows that it’s nearly impossible to keep just one commodity under the monetary standards. This is because the demand of one commodity is usually more than its need.
The perfect meaning of the gold:
Now the question is that how do investors perceive the gold? Most consider it just a commodity like other ones. Hence, when an investor wants to invest in the gold, he must first estimate the future demand and supply factor of the gold.
Gold is a useful commodity and can be used in the extreme situations of hyperinflation. Gold will try to hold the purchasing power in a better way as compare to paper currencies.
The concept of the gold changes from a person to a person. Alone in the US market the history shows that gold has served the economy just like dollar is doing today. In the past, the gold was considered as the most powerful form of commodity but now due to the inflation factor its demand is affecting. In the situations of hyperinflation, the gold may act as insurance.