I am glad to welcome readers of our resource again, and we are talking about gold again. The purpose of writing this article is to consider how the gold rate has changed over 10 years. Let's talk about what factors and to what extent influence its value and how to conduct a preliminary analysis of changes in its course for the future.
The role of this metal can hardly be overestimated: it is a unique reserve currency, which is also a commodity. An increase in its production does not lead to inflation and depreciation, as happens with any other monetary unit.
Gold cannot turn into a useless piece of metal - in almost all cultures, jewelry made from it is a favorite among women and men, and its physical properties make this substance indispensable in the production of electronics, high-precision optical instruments, medicine and many other industries.
Factors that influence price growth or decline
Traditionally, the pricing of any product directly depends on the supply/demand ratio. Gold is an amazing metal that finds its application in various areas of our lives:
- Electronics industry
- Mechanical engineering
- Medicine, dentistry
- Pharmaceuticals
- Jewelry
This list can be continued, but the total use of Au in industry does not exceed 10% of the total. The rest gradually settles in the gold reserves of different countries and the personal safes of individual citizens.
Taking into account the gradual reduction in production volumes and the presence of constant demand, it is reasonable to expect a steady increase in quotations. In addition, when the market is hectic, investors traditionally turn to stable assets, increasing demand for the yellow metal.
However, gold has shown significant volatility over the past decade. This is due, first of all, to the state of the global economy. Thus, in the period 2009 – 2011, one can clearly observe the action of American regulators - the exchange rate shows rapid growth.
After the extreme on September 6, 2011, a long decline began, which lasted almost four years. Interestingly, compared to other assets, Au always stabilizes earlier.
Gold price forecast for 5 years
The price of gold is determined by various factors and largely depends on:
— US dollar exchange rate; — investment demand; — the volume of purchases made by central banks; — trading volume on the largest metals exchange COMEX; — commissioning of new mines.
U.S. dollar
The US Dollar Index ended the previous year with its smallest annual change, rising just 0.24%. Meanwhile, gold rose 18.8%.
Gold and US$ are inversely correlated about 2/3 of the time. When one rises, the other tends to fall, and vice versa. While global investors tend to switch to the US dollar during periods of uncertainty, the move was muted last year. All this happened despite the trade war with China. They switched to gold instead.
If the US dollar falls, gold could rise.
Investment demand for physical gold
Demand for the physical metal has not been strong for several years, but overall investment demand for gold has been growing.
Investor interest in gold is likely to remain high this year because the reasons they bought gold - to hedge against overvalued markets and hedge against the possibility of a recession or crisis - have yet to materialize.
If the demand for physical gold increases, the price of gold should also increase.
Volumes of purchases of the Central Bank
Central banks around the world hold gold as a reserve asset.
Global central banks have been buying gold at an accelerated pace over the past 10 years, and bought even more last year. This is a strong uptrend.
Despite the fact that the pace of purchases may slow down, the central banks are not yet going to abandon the idea itself. The trend of accumulating gold into reserves is the main source of support for the price of this precious metal.
COMEX Trading Volume
Meanwhile, gold trading volumes on the COMEX have never been higher.
Traders in the world's largest futures market are buying more gold contracts than ever before, a strong bullish indicator. And when you buy more than you sell, the price inexorably rises.
If trading volumes increase, the price of gold will rise.
Is it really profitable to invest in gold?
Profitable. If it is not jewelry, any type of gold investment pays off over time, especially in volumes of more than a kilogram.
Jewelry, even of the highest standard, is just an alloy; most of its price is the work of the master. Jewelry acquires investment value only when it becomes antique.
Expert opinion
Vladimir Silchenko
Private investor, entrepreneur and blog author
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But it is irrational to store all your savings in gold. Large investors usually allocate about 10% of their portfolio to precious metals. This helps to diversify investments and stabilize risks from more profitable investments.
Why is it profitable to buy gold?
The gold rate is slowly but surely moving up - this is eloquently reflected in the 10-year chart (2005-2015).
This trend is characterized by the following movement: the cost of one gram or ounce of gold can rise sharply, but decline very slowly. This means that the purchase of yellow metal and the investment of fixed assets in it is a fairly profitable investment, which is characterized by cyclicality.
This chart shows the most profitable periods for purchasing (green arrows) and selling (red) gold.
The sharp rise in price is due to several reasons
The fundamental factor is the economic situation in the country. The exchange rate of the American dollar is also important. Political stability, the development of some countries and states, natural disasters and much more - all these factors influence exchange rate fluctuations.
Having studied the gold chart, based on data from the London Stock Exchange for 10 years, you can make a forecast for the near future and assess the profitability of investments and their feasibility. It is also worth looking at the dynamics of the US dollar exchange rate - this factor has a significant impact on the cost of one gram of yellow metal.
Review of ways to make money on the gold rate
First of all, people invest in gold to preserve their savings. This applies to physical metal. For speculation on the exchange rate, there are the following investment options:
- A mutual fund is the least profitable of all. The management company of a gold mutual fund will try to extract maximum benefit for itself, often to the detriment of clients.
- ETF - high liquidity allows you to instantly respond to the gold rate, which, coupled with reliability and the absence of taxes, makes it a very attractive way to invest in gold.
- Trading in unallocated gold on the MICEX. Another low-cost and highly reliable method. Access only through brokers.
- Bank compulsory medical insurance. Similar to a current account, the currency of which is grams of gold. A good option, but the bank spread can eat up most of the profit in the short term.
There are a number of other opportunities to make money on the gold exchange rate.
Gold price changes
Historically, gold has existed for thousands of years as an important metal. However, it was not used as money until about 550 BC.
Metal played a huge role in the Roman Empire, where Emperor Augustus, who ruled Ancient Rome from 31 BC. to 14 AD, set the price of gold at 45 coins per pound.
In 1257, Britain set the price of an ounce of gold at £0.89
In the 19th century most countries printed paper currencies that were backed by gold. This was known as the "gold standard". In 1971, US President Richard Nixon ordered the Federal Reserve to stop using gold as a monetary value and helped make the asset more of a store of value. This caused the price of gold to begin to rise.
In 1971, an ounce (28.35 grams) was equal to $40. At the end of the second decade of the 21st century. that's already $2000
Which way is better
Useful articles
The price of bank gold today + is it profitable to invest in it?
What will happen to gold if the dollar collapses: the most likely scenario
For trading and investing, it is better to use ETFs. This, in my opinion, is more reliable than compulsory medical insurance and more profitable in terms of commissions.
Investors from the Russian Federation have access to the FinEx Gold ETF (ticker FXGD, can be purchased on the Moscow Exchange through any broker) or any other foreign gold ETF (for example, GLD).
If you do not yet have a brokerage account and want to invest in compulsory medical insurance, choose the most reliable bank that inspires maximum confidence in transactions with precious metals - Sberbank of Russia.
What determines the gold selling price?
Pre-holiday days are considered unfavorable for gold investments, when the demand for gift jewelry increases and, accordingly, the gold sales rate increases. In Europe and the USA it is Christmas and Thanksgiving. In Asia, it’s wedding season and New Year’s Eve (according to the lunar calendar). In Russia - New Year, March 8th and Valentine's Day, which came to us from the West.
These are all seasonal changes in gold prices that should be taken into account as they occur every year. They do not depend on political and economic events. However, if you do not take them into account, then it will simply not be profitable to invest in the precious metal. And lastly, it is better to purchase and sell gold products through banks, trusted dealer companies and official exchanges. Hand trading can be unsafe.
Gold rate dynamics over the past 10 years
From 2011 to 2021, the price of gold has been constantly changing. Starting from mid-2011, the price gradually decreased until the beginning of 2021. From almost 1.9 thousand dollars, the rate dropped to less than 1.1 thousand dollars. After the analytics, 3 main periods were identified:
- mid-2021 - the price of gold rises above 1.35 thousand dollars;
- end of 2021 - beginning of 2021 — reduction in the price of the precious metal to $1.15 thousand;
- mid-2021 - the exchange rate falls below the level of 1.2 thousand dollars.
Interesting! Bitcoin rate for October 2021 and forecast from experts
Attention! Between 2015-2019 the price of gold was constantly changing, which allowed investors to make money on the difference in rates.
Central Bank Digital Currencies - CBDC
The central banks obviously see this currency destruction coming, since they caused it themselves. That's why they are desperately trying to introduce CBDC to deceive people once again. They will simply tell us that the old debt in the old dollars is gone and we now have a wonderful new monetary system.
So the more that changes, the more remains the same. Another currency system is dying, and a new digital one will work wonders. What we need to know is that the disappearance of old debt has consequences. You cannot allow one side of the balance to disappear without affecting the other side.
Thus, if the national debt is written down to zero, the same will happen to all assets that were financed by that debt. This is why we will see all asset markets collapse with bubbles of up to 90% in real terms, including stock, bond and real estate markets.
CBDC is of course a great way to control people's spending. Governments and central banks can instantly flood the market with money, issuing their digital currency to everyone, or also cutting off access to your own money.
So, CBDCs not only give the government complete control over your money. This also means that you can be fined arbitrarily for anything you allegedly did, and will obviously be taxed at their discretion.
This means the ultimate totalitarian state.
But we must remember that if CBDCs were introduced, it would just be another form of fiat money that would not survive. In my opinion, digital currencies will quickly fail due to the fact that old debt and $1.5-$2 trillion dollars in the derivatives market cannot magically disappear without serious consequences.
So whether the old currency system collapses or the new one, it will most likely happen in the next 5-7 years and possibly much faster.
