The price of gold is forever changing. In March of 2021, it would cost you around $1700 to buy per ounce, which was a drop of around $300 compared to September a few months before. However, the price is still vastly higher than it was even 50 years ago, but why is that?
What Are The Origins Of Using Gold?
First, let’s look at the history of gold. Back in the day, empires and kingdoms were founded and destroyed over gold and economies. As our ancestors started to develop and come to terms with society, gold was decided as the best method of currency for a long time.
This led to kings hoarding gold, and those who had the capacity to mine gold, becoming wealthy estate owners. This part of history hasn’t really changed. The only thing that majorly changed, was that gold went from being the main currency, to an asset backed against currencies.
Major economies have tried to go away from gold over the last few decades, to create their own monetary system that focused more on credit and lending. It can be argued that the decades spent on credit and lending was one of the primary reasons the global economy crashed in 2008.
The Longevity Of Gold
As you can imagine, with the reason being why so many old empires and kingdoms using gold, it lasts a long time. Research suggests that gold, even melted down, will not fade away. The only way you can get rid of gold, would be to jetton it off to space.
But even then, you can be sure that a mining company of some kind will fly to the stars after it. Gold is a valuable commodity due to its immortality and rarity. But what we will go over soon, is how it is used, and how much is left to mine. Even when it’s all mined up, it will still be valuable.
What Drives The Price Of Gold?
What you may not know is that the global price of gold actually dictates the economies of most major nations. Governments and central banks consider gold to be their major financial asset, largely because it’s a durable and timeless commodity.
Unlike oil, which can be consumed and lose value, gold lasts forever. Once mined, it either remains in jewelry, is melted into ingots, or is stored in vaults, retaining its worth due to its chemical properties, unlike other metals like silver, which can melt down over time. This lasting value has made gold a cornerstone of global economies. As a result, the way gold is traded has evolved alongside economic growth.
Initially, nations hoarded gold as a form of wealth and a medium for international trade. This shift in trading methods laid the foundation for gold’s continued importance in the global economy. As economies expanded, private companies and banks became integral to the gold market, facilitating buying and selling on behalf of clients and offering gold-backed services.
Today, gold trading has modernized, offering a variety of investment options such as gold futures, exchange-traded funds (ETFs), and gold mining stocks. Digital platforms have also made it easier for global investors to buy and sell gold, providing greater accessibility and flexibility for anyone seeking to profit from this valuable asset. In addition, there are even more innovative ways to benefit from gold, such as predicting gold prices for rewards.
For instance, platforms like Pynk allow users to predict gold price trends and earn “wisdom points” based on their accuracy. These points can be redeemed for rewards, adding another layer of engagement to the modern gold market. This provides a new way to profit from gold, even if you don’t directly buy or sell it.
The Future Of Gold
The future of gold is up for debate. Of course, there is a limited supply of gold to be mined, and whilst gold that is mined won’t ever be perished, it can be horded. Over the course of history, it’s estimated that a total of 190,000 tonnes of gold has been minded and entered into the global economy.
But importantly, the below-ground stock of gold reserves is estimated to be remaining of 50,000 tonnes, at least according to the latest US Geological Survey. This means that there is roughly 20% of the world gold supply still yet to be mined. New technologies and innovative mining methods may speed up the mining process, or find us new ways to access gold that is otherwise impossible to reach.
What We Use Gold For
As we’ve mentioned, gold was primarily used in terms or a resource and trading for economies to base their currency off. But as the material is unperishable, it has been used as art and jewellery for centuries.
The demand for jewellery both as a product and from an industrial standpoint, has become the main use of gold, accounting for half the demand in 2019. What you may not know about gold, is that it is actually used in a lot of electronics and technology, such as precision devices like a GPS. Therefore, more technology, more gold demand, which is why companies are looking to recycle old devices.
Veeramachineni Lalitha
I am Finance Content Writer. I write Personal Finance, banking, investment, and insurance related content for top clients including Kotak Mahindra Bank, Edelweiss, ICICI BANK and IDFC FIRST Bank. My experience details : Linkedin