By Kyle Knutson
Gold is the money of the extremely rich, and a near irreplaceable yellow metal, but certain downfalls in the economy worldwide has caused for prices to begin to plummet. Gold prices were climbing up until 2011 and then something happened, gold prices started to drop and go down and down and in the past 2 years prices have dropped from nearly $1,750 to $1,250 per oz. This means a downfall of $500 per oz. These price drops could be attributed to the fall in the value of money or it could be that gold had hit the top of the price floor and had to self correct by going down. However gold had to show that gold has gone into a recession because it exhibited a loss for two consecutive quarters. This however isn’t the only bad thing that’s going on because like I said gold is the money of the extremely rich of for people that wanted a stable currency. But gold failed those people.
As shown in this chart above gold went from under $500 an ounce to going up steadily for a solid 7-8 years and then it hit its peak and fluctuated for a year or two but stayed at that price which seemed to be the ideal price for gold. People were happy to have the amount of gold they had and if they bought it in 2004 for the hopeful investment they had a $1,250 money gain per ounce. That is almost unreal. People often don’t end up buying gold in one ounces but the fact of the matter is that people buy gold often in bars and ingots which made people make millions off of gold prices rising. Consumers then bought spastically which might have attributed to the gold price downfall. So many people took gold off of the market because they bought and bought and bought which made the price rise and rise which then brought down the demand because per ounce it was too expensive for common day people to buy which is leading to the down turn of gold.
http://www.youtube.com/watch?v=TrpYhl0gt50
Simple supply and demand laws have led to the downfall of gold in my opinion. The demand for gold has decreased as the price has gone up. People will most likely make the price of gold go back up and rise once again because of how safe people believe gold investment to be. People often believe that gold is the safest investment that often gives returns but as of right now it clearly isn’t doing that but rather it is taking people’s money daily by the millions. Prices will rise once again once the price hits a point where people will want to invest and try and make money. Gold might be experiencing a recession right now but many people including myself believe that this is only temporary and the price of gold will self correct itself and once again go up fluctuate maybe go down a little bit again but it will remain somewhat stable after this downturn.
http://www.monex.com/liveprices
http://www.goldprice.org/
http://www.habermonitor.com/en/haber/detay/why-gold-prices-are-falling/217170/
http://news.goldseek.com/GoldSeek/1386175190.php
http://www.youtube.com/watch?v=TrpYhl0gt50
Kyle,
ReplyDeleteInteresting topic!
The video commentators refer to gold as a "safe haven" for ones assets when global fiat (paper) currencies lose their value. Since the value of the dollar has risen in recent months, the price of gold has dipped. At least for now, investors are willing to keep their assets in dollar investments (not gold). People who bought gold 1-2 years ago, have suffered significant losses because of gold's price decline.
Whether we're talking about stocks, bonds, or gold, savvy investors love to buy low and sell high. As the price of something (i.e., gold) reaches a historically high peak, potential investors become reluctant to invest more in that commodity. At that point, one begins to question the stability of that high price. When other, more attractive investment opportunities present themselves, people will start to sell their gold in order to put their assets into a commodity whose price is on the rise.
Thank you!
Mr. Batterman
Pretty fascinating topic here since I thought gold was one of those rare "super" metals that cannot lose so much of their value. Like I said before, gold is rare and costs so much, so I thought the prices would be steadily increasing. Like Mr. Batterman stated, since the value of the dollar has increased, more people are leaving gold, which explains a lot. I would do that too if I had some money in gold. Anyway, I did some extra research and found out that there is only about 20 years of gold left that can be easily mined. That could raise some pretty interesting arguments in the future, not only for gold but for every other nonrenewable resource left on earth. Good job on the post!
ReplyDeleteConsidering how many people are willing to do anything for gold, it is weird the price dropped so much. Gold used to be one of those items people would invest in and invest a lot in. But now it seems people are less willing to invest in such an expensive item. Gold used to be wanted by everyone but now the demand has decreased extremely of late.
ReplyDeleteWow I had no idea that the value of gold was decreasing so much! The point of having gold was originaly so we could back up our paper money but I find it hard to believe that is still true today. In fact there is a conspiracy that Ft. Knox is now virtualy empty and that the federal reserve is actually printing worthless pieces of paper. The problem with something like that being true is that the value of a $1 bill is no longer equal to $1. That would mean that in order to buy something that costs a dollar you would need to have tens or even hundreds of $1 bills. Something very similar to this happened to Germany at the end of WW2 and it would be really scary if that were to happen to us today.
ReplyDeleteI truthfully never knew gold was worth so much, But even though the price is dropping getting $1,250 for a block of gold would satisfy me. If the value for gold is dropping rapidly, I'm worried about in the future when the value of cash starts dropping. Gold has always been high on demand and now that it's value is dropping I wonder if the demand for it will drop too.
ReplyDeleteThe price of gold is like the stock market, it's going to have its ups and it's going to have its downs. In all honesty there is no real "safe" investment that will give exceptional profit. Many people claim gold is a safe and very profitable investment but that simply isn't true because demand will fluctuate as prices change.
ReplyDeleteWow gold is one of the steadiest markets to invest in and even that is going down. I know that stocks go down occasionally but to see it drop like that is shocking, but that goes to show that anything can drop like that. I think oil will drop dramatically when people start using solar/electric cars. going back to the gold thing, I think the reason gold is going down is because all of those men getting divorce and remarried dont want to but that expensive stuff anymore for one stupid little ring
ReplyDeleteGold is like any stock in the stock market like Anthony said. But when nobody is willing to pay for such a high price, the sellers have no choice but to lower the price so that they can move product. I think the price of gold will eventually stabilize at a lower but still fairly high price that temps people to take a risk with it and hope it goes up.
ReplyDeleteI believe that gold will go up depending on how the value of the dollar or the economy fluctuates. I agree that the price it rose to is very extreme and that may be the reason for it dropping because it can't keep rising forever. It's kind of like a stock; it goes up and down and never really evens out to a certain price.
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