Why Gold Price Is Steady In August, Too

Why Gold Price Is Steady In August, Too 

The price of gold was $1,813 on August 1st  

It was $1,816 on August 31st.

Millionaires acquire gold now and have even 30% of gold in their portfolios.

The price of gold is determined by three factors, which are in demand, supply, and interest rates. According to economists and central bankers, the price of gold may change depending on changes in the above-mentioned factors. According to them, it may be a good indicator of the state of the underlying financial system and the global economy.

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There have been some changes in the status of gold in past years. In the early years, gold played a major role in international trade. Presently, gold plays an important role as an alternative asset in financial markets. However, the value of gold as an international reserve asset has significantly reduced over time due to the rapidly declining gold mining output. Hence, the price of gold remains almost unchanged compared to early times when it was considered a safe haven for storing monetary assets.

Gold is used as a standard money form everywhere. It may not have a direct relationship with any country's GDP or monetary system, but it is still considered a safe haven against economic and social risks. Economic analysts believe that gold can be used as an effective hedge against inflation because gold depreciates with respect to the currency of the country of origin and appreciates with respect to the currency of the buyer. Moreover, gold has a significant role in determining the level of interest rates across the different countries. Historical and recent trends reveal a negative correlation between interest rates and gold. Gold is seen as a medium through which interest rates are communicated to the people.

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There is no doubt about the fact that gold plays a major role in determining the inflation of the economy. Based on statistical data, there is hardly any significant change in the inflation rate of gold percent during the past few years. One would expect that after all these years, inflation would have become zero. Yet, the opposite has been witnessed. Apparently, one would expect that after a period of time, the effects of inflation would be washed out by the inherent value of gold.

In other words, gold is seen as a physical metal hedge against social and economic risks. It acts as a brake for the wheels of monetary inflation. One would not expect that paper money will continue to function without the backing of physical gold. This kind of non-coincidence could not be explained by any macroeconomic theory. Rather, it is observed that history has proven that gold is a safe haven against hyperinflation.

History has shown that no single form of currency can survive without the backing of gold. Hence, gold has proved to be a resilient hedge against inflation. The present gold prices can also be considered as a microcosm of the overall performance of gold trading in general. The price of gold is largely dependent on speculations and expectations, without which, the gold market would not be possible.

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