Gold

From Forexpedia

Gold is a commodity that is commonly used in jewelry and variety of electronic products and equipment due to its conductivity, malleability, and durability. Previously, it was used as a standard for monetary exchange as well. This practice was stopped with the introduction of the fiat system in the US in 1971. Switzerland was the last country to support their money with gold. 40% of the country’s money was backed with gold until they joined the IMF in 1999.

Gold is the most sought after investment amongst precious metals. Investors purchase gold to profit from a rise in its value, and/or as a “safe haven” hedge to their investments against any adverse economic/geopolitical situation or inflation.

Traditionally, investors can invest in gold by directly buying the physical metal through bullion, coins, or jewelry. In today’s complex global markets, investors can take part in gold’s changing value by purchasing gold exchange-traded funds (ETFs) that mimic the commodity’s price action in the futures markets. They can also do so by buying and selling options on the ETFs and futures contracts. Finally, buying shares in gold related companies can be a proxy for investing in gold. Barrick Gold Corp., Goldcorp Inc., and Kinross Gold Corp. are some of the gold producers that are listed on the NYSE.

Based on the British Geological Survey done in 2008, the top 5 producers of gold in 2006 are South Africa, China, Australia, US, and Peru. The top consumers of gold are China, India, Middle East, Turkey and the US.

Like other commodities, the price of gold is driven by the shifts in supply and demand. As mentioned earlier, gold’s unique properties have made it a vital input material for production of different industrial, manufacturing, and consumer products such as different electronics and even cosmetics. The demand for gold would rise as a consequence of an expansion in these sectors. Conversely, the demand for gold would decrease when the demand for such products slows.