Gold has always been the real ‘rock’ of society since it’s use in the ancient times for barter and US Federal Reserve’s decision back in 1970s to drop gold as a standard to peg the value of the dollar never dented the value of gold.
In fact, you’ll agree if you follow the trade markets that every time markets go through a correction phase and the nonsense factor is cleared out, gold comes out on top for its demand as a safe but in troubled times for investing.
Only recently, I was reading an article on the investors just waiting on an imminent ‘hell of a market correction’, after all the apparent market hype in ‘Trump Rally” as they put it.
The value of gold is determined by the markets 24 hours a day, nearly seven days a week. You might think that there is a shortage of gold and the price is majorly affected by supply and demand principles. However, that is not so much the case as the gold already hoarded in vaults far outweighs the supply coming from mines. Bluntly put, when hoarders want to sell, the price drops. When they want to buy and the gold supply gets sucked up, prices drive up.
Several factors play a part in the hoarders mood to play with the yellow metal;
As mentioned above, when the markets lose confidence gold gains it starts to rally.
When real rates of return in equity, bond or real estate markets are negative, people regularly flock to gold as an asset that will keep their monies worth.
The world’s all time favourites. War and political upheaval will always send people into hoarding gold mode. An asset that can store a life time of savings and make it portable to use as a bargaining chip for food stuff, shelter or safe passage out of a dangerous situation. Probably explains why it has never gone out of fashion then don’t it!