The value of gold derives from its scarcity as a commodity, as well as from its long history as a stable medium of exchange. The Gold Spot Price tends to rise during economic uncertainty and when inflation is high. As a result, gold is often considered a hedge against inflation. Inflation occurs when prices rise and, in the same way, prices rise as the value of the dollar falls. As inflation increases, so does the price of gold.
At the most basic level, the spot price of gold depends on the balance between supply and demand in the international market. If a lot of people sell or there is a big uptick in mining and manufacturing, the supply of gold increases and the spot price will fall. However, if many people seek to invest in gold, this creates high demand in the market and the spot price of gold will rise. Over shorter periods of time, the inflation-adjusted price of gold fluctuates dramatically, making it a poor hedge against inflation in the short term.
Gold prices can be extremely volatile, and that means that gold is not a fully stable investment. When the prices of stocks, bonds and real estate fall sharply, gold can maintain its value and even appreciate when nervous investors rush to buy. When expected or actual yields on bonds, stocks and real estate fall, interest in investing in gold can increase and drive up its price. It could be argued that the current influence of COMEX on the spot price of gold is ultimately a hologram derived from gold and is not really based on market fundamentals.
If you look at the gold price charts for the past six months, you'll see that the spot price has risen and fallen with multiple peaks and troughs. The physical market for gold bullion items (such as gold ingots and bullion coins sold by JMBullion) records the spot price of gold, but generally the prices of gold bullion products remain above the spot price of gold. When you visit the website of an online gold bullion dealer such as JMBullion, you are likely to see the live spot price of gold quoted all over the website. Central bank activity, from printing money to buying or selling physical gold, can influence gold prices.
There have been times when, due to changes in the value of one currency, the price of gold in another currency may rise or fall more than the price of the US dollar or even move in the opposite direction. The fixed price is a reference point for large institutions, producers and other important market participants when setting contract prices. A spot price is the fluctuating market price of an asset bought or sold on commodity exchanges contracted for immediate payment and delivery. Gold is more “money” than a commodity, but since it has an industrial and jewelry use, the price can be affected by the performance of raw materials in general.
China's physical gold bullion market (SGE) is growing year after year and could ultimately dictate the future of the fluctuating spot price of global gold in fiat currency. Given some of the enormous powers of gold and the derivative leverage involved in the global gold price discovery mechanism, some market experts believe that the system has become obsolete today.
