Gold Price and Its Importance For The World Economy

Gold is the most popular precious metal, recognised and respected by most everyone in the world today. Throughout history gold was sought after by people, it was used as money, as jewellery, as well as an industrial material, but mostly as a very popular investment product.

The price of gold

Gold price is very variable. It has experienced many fluctuations but one thing is for certain – gold price continued to rise consistently. For example, the lowest price of gold in the last 15 years was in 2000, only 274.5 US dollars per ounce. Nowadays, in 2014 it sits at- 1312.9 US dollars per ounce. Price is influenced by many factors. For example, basic economic regulations – supply and demand, including demand trough speculation. It is also determined by measures and actions of central banks, International Monetary Fund (IMF), the value of the US dollar, the general state of the global economy, and sometimes, in grave occasions, it is determined by national emergency situations in the country, even by war or invasion.

Regulatory organisations

In order to prevent any manipulations, gold exchange markets are supervised by governmental and self-regulating organizations. There are four important gold exchange markets in the world. We have London Gold Market (London Bullion Market Association, abbreviated as LBMA ), America Gold Market (CME Group), Zurich Gold Market (controlled by three banks – UBS, Credit Suisse and Union Bank of Switzerland) and Hong Kong Gold Market (Chinese Gold and Silver Exchange Society, abbreviated as CGSE). The Japanese gold market (Tokyo Commodity Exchange, abbreviated as TOCOM) is also very important. By connecting these markets, gold trading can be achieved within 24 hours through the worldwide network.

The major producers and consumption

South Africa used to be the world’s dominant gold producer before 2006. It was followed by the USA, China, Australia, and Peru. Recently, other countries with greater land surface areas have overtaken South Africa considerably. Since 2007, China has become the largest gold producing country in the world, followed by Australia, USA, Russia, and Peru. South Africa is currently in the sixth position. China has also dominated the figures of gold importation generally – 130 tonnes in March 2013, although a reduction of 27% in these figures was seen between February and March 2014. According to Gold Fields Mineral Services, abbreviated as GFMS (a leading independent precious metals consultancy specialised in global gold, silver, platinum and palladium market research, formed in 1989), only a total of 174,100 tonnes of gold has been mined in human history.

Currently, the world consumption of produced gold is about 50% in jewellery, 40% in investments, and 10% in industry. In industry, gold is commonly used in electronics, dentistry, commercial chemistry and other fields. Its characteristic of high malleability, ductility, flexibility, resistance to corrosion and most chemical reactions, and conductivity of electricity have led to many more uses, including coloured-glass production and electrical wiring.

Historically, gold has also been an excellent way to store wealth and secure purchasing power for long periods of time. So, it seems that mankind has had a strong affinity with this precious metal, and it makes sense to make use of the many advantages that gold has to offer.

To find out more about gold pricing, contact us