The price placed upon every good and service is determined by the value attached upon it. A commodity with a high value tends to have a lasting price because of the benefits derived from it. This is why certain commodities experience just slight fluctuation in price, irrespective of the crisis surrounding it. Nowadays, many folks are after gold, not only because it is a source of investment or for the making of jewellery such as is a common practice, but also because it's used for the production of medical devices and some sophisticated forms of electronics. Perhaps you have ever imagined what could be the factor behind the rise in the gold price. From history, the price of gold per ounce 50 years ago, compared to what it is as at today, has risen by almost $300. Meanwhile, the price of gold per ounce in this month of March has been fluctuating around $1,625. Now imagine when one who is able to have more than enough. Imagine the value of the asset he has been able to reserve for himself and his generations unborn if perhaps he feels like keeping it. If the price of gold is able to increase to this extent, what could be the likely factors behind it irrespective of the crisis and challenges it could have encountered.
Factors that determine the price of gold
Value of the US Dollar
Normally the USD is used as a standard in measuring lots of currencies, but when it comes to comparing USD with the price of gold, they are usually inversely related, i.e, moving in opposite directions. The reason being that it is dollar-denominated. A strong USD will result in a drop in the price of gold, while a weaker USD will bring about a higher gold price. At such a period, in order to guide against inflation, there will be an increase in the demand for gold and that will result in a surge of the gold price. Many times, gold traders use this strategy to trade gold in the gold market.
Global jewellery demand
Just as explained in the first paragraph of this writeup, gold can be used in the manufacture of jewellery. There are lots of folks these days that are easily driven by luxury because of their wealth. One of the ways they exhibit their wealth is by adorning themselves with gold jewellery. This makes the demand for gold to increase, with a relative increase in price. According to the World Gold Council, jewellery's demand in 2019, accounted for at least half of world gold demand, which accrued to 4,400 tonnes. So, why won't the price of gold increase?
Central Bank reserves
Gold is a store of value, so, gold is one of the major and rare commodities that central banks keep in their monetary reserves for easy diversification. Which means whenever central banks diversify their monetary reserves from fiat into gold, there is usually a corresponding rise in the price of gold.
During the economic crisis, such as we have now with the CoronaVirus pandemic, which has affected the prices of so many commodities and with minimal effect on the price of gold, investors tend to shift their investment focus on gold. Therefore, the high demand of gold at this time, to hedge against price fluctuation, further protects the price of gold from being adversely affected, even if other commodities are seriously affected. You can check the price of gold today compared to what it was three months ago. Despite the slight reduction in price, it still remains one of the safest forms of investment at this time.
Other factors behind gold price are as follows:
- Investment demand by traders from gold traded funds.
- Another factor is supply meeting demand on the production of gold, which obeys the law of demand and supply.
How the Price Determinants of Gold Influence the Price of Digital Gold
Digital Gold, is the digitalized form of physical gold on the blockchain, particularly on Ethereum smart contract. Due to the associated parameters, such as:
- storage of physical gold in a safe vault (BullionStar Vault in Singapore) to back Digital Gold;
- provision of liquidity;
- provision of Digital gold market place for nonstop trade of Digital gold against other cryptocurrencies (BTC and ETH);
- issuance of Digital Gold on Ethereum smart contract for transparency and security;
- the use of a trusted third party for auditing,...
...as well as others used in ensuring that Digital Gold since its creation maintains almost the price of physical gold, which is also obtainable in the gold market. It has, therefore, been and remains the only authentic Digital gold ever known. Therefore, whatever is happening in the gold market worldwide, by virtue of the fact that Digital Gold is fully backed by pure physical gold, has a direct impact on it.
Below is the present price of Digital Gold, as compared to the present price of physical gold as indicated in the diagram shown above:
After making an analysis of the price of Digital Gold for the past three months to date, I discovered that there was an increase in price between late February and Mid March, with an average price of $54 per gram of gold, which is in correlation with what was obtainable in the world gold market as indicated by Bullion. The price also as of today shows no significant reduction, despite the present economic crisis, which is the CoronaVirus.
Below is the historical data of Digital gold price from January to March:
NOTE: Currency is in USD
The love for Gold will never diminish and its demand will continue to increase. By virtue of that demand, there will definitely continue to increase in price, because it is an asset that does not diminish in the face of economic crisis. It's a blessing on gold lovers that there now exist digitalized gold, called, Digital Gold, which enables your love for gold to now be in a safe and secured form. A form in which you can easily get hold of your asset at any time and can be liquidated whenever you want. Indeed, technology has made life easy.
Ona final note, I am urging all my friends on this platform to please stay healthy, stay safe and keep safe. Observe your personal hygiene in this time of crisis and my earnest prayer is that, you will not fall victim of any unforeseen circumstances.
Thanks for your audience.
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