It is important to see the big picture, and understand the reasons why gold rate today is on the rise.
An Overview of 1974
Nixon declared that the US dollar could no longer be converted to gold by 1971. This was a significant change in the role of gold as a currency. Three years later Congress made it legal for US citizens to own gold. The gold and dollar were exempted from the 35-cent per ounce government price. Investors were unsure of the government’s ability in 1980 and 1979 to limit the expansion of the money supply. As a result, panic buying of precious metallics was done as a hedge to inflation. The gold price rose dramatically, reaching an all-time high in January 1980 at $850 per troy ounce. Over the four year period 1976-1980, the gold price rose by more 75%.
In order to reduce money supply growth, in the early 1980s, the US Federal Reserve raised its interest rates. The Federal Reserve achieved its objective and by 1982, interest rates were falling and fears of inflation had subsided. The market soared after investment capital began to shift into financial assets that were made of commodities, such as gold. After the historic January 1980 highs and a decline of $300-$400, the price for gold fell to a low point of $256 in Feb 2001. The bull markets for gold resumed, and by November 2009, the price had risen to $1.140 – an increase of 445%. For some investors, this indicates that the past is repeating itself. Gold is now worth more than $2,000 an ounce. To reach the 1980 level, adjusted for inflation the price of gold must rise to more than $2,000 today.
Today’s Gold Market
The Gold Fixing is a process that determines the price of gold. Also known as the London Gold Fixing or Gold Fixing. Five members of London Gold Pool meet twice daily via telephone at 10:30 GMT or 15:00 GMT to settle any contracts between members. These settlements, brokered through the Gold Fixing, have become a global benchmark in the pricing of gold and its products.
Let’s discuss some of these factors that can influence the gold market.
Gold Supply
An agency keeps track all of the world’s gold. Gold Fields Mineral Services Ltd. (GFMS) is a London-based consulting and research company. Its mission is to study the international silver and gold markets. The annual Gold Survey is published annually by GFMS. This survey provides statistics and analysis on gold supply in more than 60 countries. GFMS projects that the total above-ground volume of gold stocks is approximately 160,000 tons, of which more than 60% have been mined between 1950 and now. GFMS calculates that all gold ever mined will form a cube with a diameter of 20 yards (19 metres) on each side.