Gold reached $450 today

[orbaya]

According to Kitco.com, the price of gold reached $450 today...and if I''m remembering correctly platinum was about $865. I''m curious to know who and what drives the prices of the metals up and down? Is there a way to predict if the prices of these metals will decline at some point? It''s amazing that the prices have doubled in the last 5 years!

The price of diamonds seems to be on the rise also. Is there a site that shows historical charts like Kitco for diamonds?

Thanks!

 

[perry]

Precious metal pricing is largely driven by supply and demand. There are steady industrial markets for some of those materials like Platinum (but even that has had it''s ups and downs). Gold has more ups and downs, and is more affected by the jewelry industry and investor speculation as there is not a large commercial use for gold (there is some). Most gold is used for jewelry or for bullion currency (in certain country 20 Carat bracelets are a form of portable savings). One of the biggest factors affecting gold is that certain countries may decide to stockpile - or sell their stockpile - depending on their financial needs. In other cases, sizable production mines may be shut down due to increasing production cost.

Mines take time to re-open. Should gold stay at its current level mines that were previoiusly shut down will be reopened to increase the production of gold. But the mines are only profitable if the gold stays above a certain level, and too much increase in production and the price of gold falls again below the profitability range.

Occasionaly new mines are established - but they take a lot more time and cost to start up than reopening a previously closed mine.

I do believe that gold reached arround $600 per ounce in the early 1980''s, and has cycled between the upper 200''s and mid to high 400''s since. As an investment you could make a killing - or be killed in the gold markets. I have never seen anyone reliably predict a long term trend for gold.

Perry

 

[PhillipSchmidt]

Excellent answer Perry.

I heard an interest theory on gold prices a while back.


An ounce of gold is equivalent to a weeks wage it has been the same ratio since ancient egyptian times.

 

[cascadejim]

there are actually some large commercial uses for gold. The computer industry uses gold for all their leads, and it does add up to a lot of gold. The company I work for uses gold to plate a lot of our products for the computer industry. The all-time high price KILLS us because most of our prices are locked in with our customers. It sucks.

The real reason gold is so high is because our dollar is getting weaker and weaker, it means that everything purchased from the world market will become more and more expensive. As the dollar gets weaker foreign investors pull out of investing in the dollar (something like 20% of our currency is purchased by foreign investors) and instead invest in gold. This drives the price up as well.
Our dollar is getting so weak that one of our dollars is equal to $1.18 Canadian. Check out the chart I attached, it''s scary.

 

[youngster]

Actually, gold is not anywhere near its all-time high. I believe it hit about $850 per ounce in January 1980.

 

[perry]

Jewelry accounts for about 75% of the use of gold in the world. However, stockpiling and selling stockpiles has the biggest effects (which are not shown in the following charts), along with currency issues as mentioned above.

www.goldinstitute.org/supply/fabindeve00.html

Perry

 

[hoorray]

HI Orbaya,

Leonid charts diamond prices in these price charts. It''s pretty interesting stuff.....

 

[orbaya]

Thanks for all the responses! It''s amazing that gold can vary from $800 to $200 to $450...granted I know there is inflation and all that, but still!

If gold was at $800 in 1980, what was platinum?!?!


Another question while we''re discussing cost of metals... I looked online to see how many grams are in an ounce I saw that it was 28.35, is that correct? According to mathweb.com if one converts grams into ounces the ounce weight is .172823. By using the platinum price of $850, I come up that 4.9 grams of platinum costs $108?? Maybe I''m doing something wrong (I''m not that good with numbers), but that doesn''t seem right. I was looking at this ring: Eternity Ring. So the platinum of this ring costs only $108??

Please make me understand!!

 

[denverappraiser]

Date: 11/29/2004 9:30:57 PM
Author: perry
Precious metal pricing is largely driven by supply and demand.

Perry

Gold prices are driven by fear and greed. Supply and demand is about rational markets and gold is far from rational.

I would LOVE to be able to accurately predict if gold was going up or down tomorrow. Heck, I''ld settle for a 51% chance of being right. I would be a very wealthy man.

Neil Beaty, GG ISA
Independent Appraisals in Denver

 

[perry]

Neil:

I counted "Fear and Greed" in the "Supply" part of the equation. Much gold "jewelry" is in fact a method for most of the people in the world to store theim money relatively safely (and storing on their body is often much more safe than anywhere else in much of the world - actually, it is typically stored under the womans clothing - and will get yuo an amost instant death penalty for violting a womans clothing in many of these countries).

As far as predicting which direction the gold market is going and the potential effects on our finances: You and me both... I have studied it for years off and on, and laugh at all the "investment" hype. But I do think that I could make a good living by storing gold for people who wanted to invest in it and have it availble to withdraw if they needed to flee the bigger cities due to some future disaster (and even have a great location picked out).

Perry

 

[Iiro]

Since America owns most of the gold it cannot be valued against dollar. Gold was previously valued against German Mark, now against Euro. For us Europeans the gold cost roughly the same as before.

If dollar goes down, gold goes up, otherwise we would buy all your gold while dollar is cheap. Simple.

 

[denverappraiser]

Gold is a global commodity and consequently will float with currency variations when viewed from the perspective of any individual currency. The fear and greed reference is to actual changes in the market prices.

Fear: When people are feeling nervous about the state of their local economy they are inclined to buy more gold and are less inclined to sell what they already have. This drives up the price. The reverse is, of course, also true. Gold has something of a reputation for being a more secure form of wealth than, say, business interests or education. Whether this reputation is disserved is another issue entirely.

Greed: There is an enormous ‘investment’ industry associated with gold and they serve as both a supplier and a buyer to the rest of us. By their nature, all they consume is time and emotional energy but their behavior has a tremendous effect on the prices. The fact that well informed professionals are no better at predicting the future than a coin flip doesn’t seem to matter a bit. (These people are big on fear as well)

Neil Beaty, GG ISA
Independent Appraisals in Denver

 

[Christmas Eve Proposer]

Date: 11/30/2004 10:52:32 AM
Author: youngster
Actually, gold is not anywhere near its all-time high. I believe it hit about $850 per ounce in January 1980.

That's back when the Hunt Brothers were trying to corner the market, right? They certainly helped a lot of people make a lot of money (If they sold at the right time, of course).


I spend a lot of time on poltical boards...And one thing I've learned is that the Kooks LOVE gold! Kooks = Those who believe in New World Order conspiracies, those who stocked-up on supplies before Y2K, and those who are convinced al Qaeda is going to nuke us.

The theory being (Which is correct if we're to assume some of these Kook things will happen) that gold has a real worth where bank notes and paper currency do not. So, if and /or when society melts-down, gold will be as...Well...Good as GOLD!! (Me? I'd rather be stocked-up on penicillin!!)

Lots of these guys bought a LOT of gold just after 9-11.

 

[perry]

The Hunt brothers tried to corner the Silver market, it had no effect on the Gold Market.

Perry