How the Economy Affects Gold Prices
Gold is a material that is notorious for its constantly-fluctuating prices and the seemingly random rates at which that price changes. Former Federal Reserve Chairman Ben Bernanke once famously told Congress that, “nobody really understands gold prices, and I don’t pretend to really understand them either.” The average resident of Orange can’t be expected to comprehend the complicated logistics of pricing gold and the minutiae of economics that affect it. That being said, understanding some of the basic factors that affect the value of gold is beneficial when you want to buy or sell.
Value of the US Dollar
The value of gold around the world is priced in US dollars, so the value of the dollar has a considerable impact on the price of gold. The stronger the US dollar is, the lower the price of gold will be. When the US economy is weaker and the value of the dollar goes down, the price of gold will generally increase. Everyone falls on hard times, and an economic downturn likely affects you in a way that makes it difficult to hold off on selling your gold for cash if it’s needed. However, if you do want to ensure that you’re receiving the most value for your gold jewelry, it’s ideal to wait for a time when the US dollar is especially strong.
Central Banks’ Gold Reserves
Countries’ central banks, or reserve banks, are the banks that manage the country’s currency, money supply, and interest rates. These banks hold large gold reserves in order to strengthen the nation’s currency, since having tangible assets tied to the currency makes it more reliable. When central banks purchase gold, it causes the value of gold to increase. Recently, Asian and European banks, especially China and Russia specifically, have begun purchasing small amounts of gold, which has resulted in an increase in gold’s value.
Inflation
Inflation, perhaps surprisingly, has a direct relationship with gold prices. When inflation rises, so does the value of gold. Inflation causes the value of that country’s currency to decrease, and so citizens tend to hold their money in the form of gold rather than a weakened currency. Therefore, when inflation remains high over a longer period of time, gold increases in demand and in price.
Commercial & Industrial Demand
Everyone knows the basic laws of supply and demand: when supply is low, demand will become higher and the value of that object goes up. When the demand for gold jewelry increases and the supply becomes more limited, the price of gold automatically rises in response. Once the demand for jewelry decreases, the price of gold will also decrease. Almost fifty percent of the world’s gold production is used in jewelry, so the values of these two items are very closely linked. If you have gold jewelry that you want to sell, wait for a time when gold prices are higher and the demand is increased in order to receive the best value for your items.
Watch & Wares has been buying and selling gold for more than twenty years, and we’ve established ourselves as the local experts. Orange residents know that when they visit Watch & Wares, they’re receiving a fair and competitive appraisal offer that directly reflects market prices. If you have gold jewelry that you would like to sell for quick cash, stop by Watch & Wares in Orange today or give us a call at (714) 633-2030 to schedule an appointment.
