Why is Gold So Valuable Now?
In the past several months, the price of gold on the market has soared. Nearing all-time historic highs when adjusted for inflation, gold is worth more now than it has been in years. Both buyers and sellers alike are scrambling in a market where gold has reached astronomical prices.
You may be wondering: why is gold so valuable now? Gold’s price on the market is affected by many factors, but the two most influential are the gold market, and the financial markets.
Obviously the price of gold is driven by the marketplace, and the gold market is impacted by many different variables that are directly responsible for the value of gold in the financial market. The variables that have the most impact on the gold market are the cost of mining gold the cost of refining and shipping gold.
Gold is costly to mine at any time, but when the costs of mining and shipping gold rise, the price of gold will inevitably rise, as well. What affects the economy affects the price of mining gold; hence the same effects of inflation that are passed on to you in the form of higher fuel and electricity costs, are being seen throughout the world – including America – in areas where gold is mined. Since gold mining is an inherently expensive and difficult undertaking, it is very closely tied to the costs of fuel, electricity, and manpower.
But why is gold so difficult and expensive to mine? As a rare and precious metal, gold appears in the earth’s surface in very low concentrations. While some gold is still found close to the earth’s surface in placer mines, most of the gold that comes to market must be removed from ore that lies deep within the ground. Thousands of tons of this ore must be mined to in order to produce a significant amount of gold.
The cost of mining these thousands of tons of ore is high; expensive and sophisticated machinery is used in gold mines, machinery that requires a large amount of both electricity and fuel. Once the ore is out of the ground, the job is only half over. The gold must then be separated from the ore using a chemical process – involving cyanide - that is both time-consuming and costly, both in terms of the chemicals used to extract the gold, and the manpower required to do so. So when fuel, electricity, chemical, and manpower prices rise, so too does the cost of mining gold.
High fuel and manpower costs affect the price of gold even after it is mined. The price of mined gold is also affected by transportation costs. When the expense of transporting gold rises, the price of newly mined gold reflects this increase, and the market price for gold rises accordingly.
The same rising costs that you see in everyday life affect the price of gold, too. You’re paying more at the pump – so are gold producers. You’re paying higher utility bills – so are gold producers.
The value of gold is also influenced by the financial markets. When experts see the financial outlook as unstable, then gold, viewed as a relatively stable commodity unlikely to drop in price, rises in value. The best example of this hits close to home. When the value of the American dollar falls on the international markets, as it has recently, the price of gold will often rise. This rise is due in part to the perception of gold, which is also considered a currency, as a more stable currency than the American dollar. This also holds true for other countries’ currencies.
History has also shown that a fear of inflation will also affect the cost of gold. Inflation has been predicted for the United States; and financial experts have noted that when an inflationary period seems imminent, the price of gold rises. For an example of this theory, recall that the last time the value of gold rose as it has recently was during the inflationary period the suffered by the U.S. In the late 1970s.
If you have gold to sell, now is the time. When gold becomes more expensive to mine, the value of existing gold goes up in tandem with the greater demand for gold that can be recycled. Existing gold will always be less expensive to use in trades that rely on gold for manufacturing. However, it becomes more profitable to sell for those who have it.
If you have considered selling your old gold jewelry and gold scrap, but just haven’t gotten around to it, do not hesitate. Contact a gold broker today, while gold is selling at historic highs. You’ll be glad you did!
You can leave a response, or trackback from your own site.
