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What is the reason being for hiking in the prices of gold?

(Guest)

What is the reason behind for hiking in the prices of gold?

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10 Replies

harsha (s) (116 Points)
Replied 02 February 2012

International market has experiencing surge in Gold Price since a year. This surge implies the following reasons.
(1)   Downfall in the value of dollar.
(2)   Rising demand of gold jewellery.
(3)   No new reserves of Gold are being searched.

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CA Vasiullah (Vasi) (Audit Executive) (1823 Points)
Replied 02 February 2012

The simple reason is its scarce and it's supply is highly disproportionate to the demand. Also due to failure of many big companies and depreciating doller people are finding gold more trust worthy and profitable investment.

(Guest)

Some more replies plsssssssssssssssss !

CMA.Manikanta (Grad-CMA &CA-Final) (314 Points)
Replied 02 February 2012

1. Supply and demand- this is one of the top reasons that gold is going up in value. The production of gold has slowed down since the economy has gone into a recession so the demand for gold has gone up. More and more companies are offering above and beyond the going rate for gold just so they can get their hands on one of the hottest commodities. It is said in order to decrease the demand for a product you need to raise the price.

2. China is adding to their reserve of gold. It has been well known that China is trying to increase the amount of gold that they hold so for that reason alone the price of gold has gone up. They are pushing for their citizens to invest or buy more gold and they need to be sure that they have an excess amount of gold in stock to meet their demands. They hold the title for the most populated area so their demand for gold is much higher than any other area.

3. India is one of the main manufactures for jewelry and they hold the title for main mining area for gold. They plan on continuing to buy up gold for manufacturing jewelry as the amount of mining has gone down

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Lakshmi (Student) (1836 Points)
Replied 02 February 2012

@ Manikanta

When economy is on recession how the demand for gold will increase?when people dont have money how they buy gold?

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(Guest)

1. To hedge against dollar. Weakining of dollar lead to increase in price of gold as gold is bought and sold in dollars.

2. To fight aainst inflation.

3. Short supply of new gold.

4. Lack of demand deficiency,

Indians have a good appetite for yellow metal :-)

5. Gold is considered as safe heaven investment agaunst all other forms of investment. Any signal of weakning economy, investors turns towards gold.

6. Classic case of gold price rise is in 2008 where all the stock exchanged were drastically down. Although they have recovered but the confidence is not gained which has supported the gold prices.

Unless we get clear signals of European crisis, gold will continue to maintain the same level, or rise further

(Guest)

@ Lakshmi

Its not that during recession there is no money to invest in gold. But there are no avenues during recession for people to invest. Eg., People will not invest into shares, bonds etc.

FII's will withdraw their money from market and park it into safer investment.

Recession is a macro factor and affcts the global economy

Gold price as an "investment" fluctuates. Its not affected by demand from public for disposal eg. during festivals etc.

Still not clear with replies.... pls let us know