Throughout history. Gold earned its place as the universal store of wealth. The main reason is that it is more stable than most commodities. Between the 1800s and the 1900s, the price of gold only fluctuated by a few dollars. The rate of fluctuation has since increased. Since 2002 to now, the price of gold has quadrupled. So what may have been causing the surge in value?
In 2002, a 24K ounce of gold might have cost you a little under $300. Now that same ounce of gold cost $1,400 or more.
The price of gold is given per troy ounce, this is different from the avoirdupois ounce. Whilst a standard ounce is equal 28 grams, a troy ounce is 31.103 grams. Other gold dealers in the market use pennyweights as a unit of measurement. A troy ounce is the equivalent of 20 pennyweights. This units of measurement t go back to medieval France.
So, how did we get from $300/troy ounce to $1,400?
The price of gold leapt to $1900/troy ounce in 2011, just nine years after the price was a mere $300. This was not the first time the gold price Australia had sky rocketed to incredible heights. In 1965 gold was valued at $35/ troy ounce but it skyrocketed to an amazing $160.86 in 1975 once gold was removed from the currency peg.
What are the reasons for gold price increase?
Because of its history, gold’s worth cannot be affected by fiat currency inflation. This makes it a secure investment. When the security of fiat currencies is in question people begin to buy more gold. As more people buy, the price increase. This is what happed in 2002. When the economy is unstable like it was in 2008 during the global economic crisis, people seek out secure investments like gold.
What is the future?
There is an increase in the number of people and governments buying gold across the globe. China and India have always been the biggest consumers of gold but more governments are buying up gold for their central bank reserved. Some economic analysts believe that the price of gold will go up to $1,700 by the end of the year, some have even gone as far as predicting a $5,000/ ounce price in the near future. If the yellow metal continues to soar it might once again become the world’s trade currency.
Gold prices in Australian dollars
Gold prices broke the $1,900/ troy ounce mark in Australian dollars for the very first time. This has been good for share prices for major mining companies based in Australia lime Newcrest Mining and Northern Star Resources.
Gold price Australia has gone through several spikes throughout history in response to global events that caused economic uncertainty. When the US dollar goes up, the Australian exchange rate is weakened. Other factors that contributed to the rise of the gold price in recent times include Brexit, and the US trade war with China.
The last time gold reached incredible highs was on 5 September 2011 when concerns over the U S defaulting on its debt pushed the price of gold to $1,895. This did not happen and of course the price fell especially more so because the U.S economy showed sign of recovery and the government had succeeded in keeping inflation low.
The gold price Australia is expected to continue rallying over the next couple of months. With experts predicting a glorious future for the yellow metal.