The price for gold is generally a defensive asset allocation to one’s investment portfolio, and in most cases a conservative investment that becomes more attractive in periods of political volatility. Investors is some cases use it to shield their portfolio’s against potential inflation. As gold is considered to be a commodity, it’s a safe holding when there is global economic and political instability.
The demand for the price of gold comprises commercial and investment components. The commercial demand is derived from gold, mostly in jewelry and electrical parts. The investment demand for gold is derived from the holding of gold as a reserve asset.
India is the largest purchaser of gold, followed by the US. India’s large demand for the price of gold is mostly due to its demand for jewelry and a cultural staple for many Indians.
Today, the price for gold is bought and sold by central banks around the world as a reserve asset to back up their currency, even though the gold standard no longer exists.
Since there is no consumption of gold in an economic sense, the price for gold stocks remains essentially constant, while ownership shifts from one party to another. The current production of gold is significantly less than the supply already mined since ancient times.
The gold industry in Australia
The Australian gold industry benefits from a higher spot price of gold. Fundamentally, a higher price for gold will increase revenue potential for Australian gold producers. The discounting of the higher expected revenue will, in theory, raise the share price for Australian gold firms.
Another factor impacting on the Australian gold industry has been the strengthening in the value of the Australian dollar. The Australian dollar price for gold has increased dramatically over several years due to both the appreciation of the US denominated spot gold price and the Australian dollar.
Where can you find the price for gold?
It can be accessed through ETF’s, bullion dealers, direct equity investments and through gold producing companies.Other areas you’ll find related gold investments are through the Australian Stock Exchange (ASX) and overseas markets.
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