The gold price has fallen more than most analysts and economists expected during the last month or two, but if you ask your friends, family and colleagues, you could find yourself a bit confused. You see, most people think that gold prices are based on supply and demand, and in many case this is true. However, there is more to the law of supply and demand than what you and the people you know do with your gold.
There is more to the gold market than what meets the eye…or in this case, the hands. The physical gold market, comprised of bullion bars, bullion coins and investment-grade numismatic coins, is only a small fraction of the gold market as a whole. Things like gold mining stocks, gold futures contracts, gold options contracts, unallocated pool accounts and exchange-traded funds (ETFs) involve much larger volumes of money than the physical side of the market.
Investors who buy actual gold are usually more concerned with safety and preserving wealth than with making a quick buck. These individuals, of whom you possibly are one, are less concerned with the daily spot price and more concerned with gold’s longevity as a safe-haven asset and hedge against inflation. Investors like yourself are holding their gold as tightly as possible.
The entities selling gold are large banks, institutions and other profit seekers. Since they control more money than we as household investors do, the gold price has fallen because of their profit-taking. At the end of the day, however, the price of gold will not matter as much as what you can buy with gold in comparison to U.S. currency.
Recommended for you: Gold IRA Rollover Guide and Silver Investments.
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