When And Why Do Gold Prices Drop? A Complete Guide
Gold has long been considered a valuable metal. According to evidence, researchers believe that many ancient civilizations, including the Egyptians in 5000 BCE, the Sumer Civilization in 3000 BCE, and the Minoan Civilization in 2000 BCE, used gold as currency or as a sign of luxury or power. In the current world, gold still holds value.
Many people widely believe that the value of gold will increase in the future, which makes gold investment the best option to take. However, that seems far from the truth. Although gold prices have significantly increased over history, their prices can still drop. Here’s a guide that discusses the when and why of gold prices plummet.
Market Consideration
Gold prices have seen peaks and falls in the previous decade. During the start of 2011, gold was priced at $1,360 and continued to rise in October 2012, when it was $1,745. The gold price plummeted till November 2015, when it was recorded at $1,069. After that its price started to rise and at the end of the decade was recorded at $1,866.
You can understand the rise and fall of gold prices by focusing on the global market and decisions taken by the government and central banks. The US at the time was dealing with low inflation rates, which made gold useless to act as an inflation hedge. This caused an increase in the gold liquidation, which decreased the gold rates.
Supply Surge
Gold is a pure metal that can only be found from mining the earth. According to experts, the gold supply in the market tends to remain static even after decades of searching. According to the USGS, you can fit all the gold found today inside a cube no larger than 28 meters from every side.
It isn’t a speculative asset, as it focuses on protection against inflation and currency devaluation rather than gaining profits. Gold isn’t like other commodities such as crude oil, natural gas, or ethanol. Experts say that industries use less than 10% of the mined gold, while gold investment dealers use the rest for trade and investments.
Conclusion
The law of supply and demand offers an understanding of when and why gold prices drop. Gold prices increased when demand was higher than supply, which hasn’t improved much over the decade. However, gold prices did fall under certain conditions. Examples include when global economies are recovering from a financial crisis and when there was an increase in dollar strength. These conditions show a decrease in demand which causes the price of gold to decrease.
If you want to make gold investments in the future, you should focus on the country’s economic conditions and how it compares to the global market. You can also contact a trusted precious metal investment dealer to identify the best investment option.
If you’re looking for a reliable precious metal investment dealer to make your investment, contact Orion Metal Exchange. We are a reputable online precious metal storage company. We offer precious metal IRA investing services and can help you choose the best precious metal investment option for you.
We can also assist you in buying silver or gold coins online. Please contact us to learn more about our services.
