Trading Gold

Gold has a long history as a precious commodity and a symbol of wealth and prosperity, used for trade and currency since ancient civilization. The largest gold producer is China, with 370 metric tons produced annually. Australia, the United States, Russia, and South Africa are also significant gold producers. 

The Gold Standard

In 1965, all major countries participated in the worldwide gold standard system known as the Bretton Woods arrangement, where paper currency was linked to the price of gold. 

Yet in 1971, President Nixon ended the gold standard in the United States, and today, no country uses a gold standard system. Removing the gold standard caused gold to dramatically increase in value. From 1971 to 1980, the price of an ounce of gold jumped from $35 to $850. 

In times of financial crisis and instability the price of gold rises, because gold is seen as a safe investment. With the instability of the global economy, there has been talk of a return to a gold standard system, but for now it remains merely theoretical. 

Factors That Influence Gold Prices

  • Gold is widely used in electronics. Any smart phone, computer, or cable will likely contain gold. The rapid development of electronics technology will continue to fuel demand for gold. 
  • Production of gold is unable to meet the demand, keeping prices high. This situation is expected to worsen over the next decades. Supply is unable to keep pace with demand, creating an annual deficit of 1,000 tons. 
  • India is currently the largest global consumer of gold, with an estimated 700 tons a year. This number continues to rise and India’s gold demand will likely drive prices higher in coming years. 
  • Recession and financial crises in various countries prompt a return to investing in gold. It is important to monitor the economic stability of leading countries, as well as the worldwide political situation. 

Anyone who wants to trade gold should be aware of the many different factors that can influence prices and perform their own analysis.

Trade Gold