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Gold Price in the USA
Gold has been a form of currency around the world for thousands of years. The first known gold coins were found in Asia Minor and were said to have been made around 600 BC. Gold is a highly sought-after metal that has many applications including jewelry, investments, and manufacturing. There are several reasons why the gold price fluctuates daily, and there are many tools that can be used to track and predict those fluctuations.
What Affects the Daily Gold Price?
If you are a potential investor in gold or have an active investment in gold, you need to be aware of the factors that affect the price of gold. Unlike stocks and other paper backed investments, gold does not have earnings, profits, shareholders, or executive salaries. As a potential investor, you need to know what the major factors that affect the price of gold:
Central Bank Reserves – Central banks around the world are constantly buying and selling gold. The US Federal Reserve acts as a custodian for the US Department of the Treasury and the Treasury owns about 261 million troy ounces of gold as of May 31, 2017. The buying and selling of gold by central banks is a factor that affects its price (supply and demand).
Gold Production/Mining – Gold mining and production has become increasingly difficult, as there is a finite amount of the metal on this planet. Panning for gold isn’t effective anymore. These tougher manufacturing processes and the decreasing number of productive gold mines have increased prices.
Volatility Indexes – Volatility Index, CBOE Volatility Index, or the VIX commonly referred to as the fear index. When consumer confidence is at a low, the VIX goes up. The gold price increases when uncertainty is high, which is reflected by an increase in the VIX.
Jewelry Production Demand – Other than a store of wealth, gold is widely used in jewelry production, which accounts for the highest percentage of global demand, particularly in India. With global populations increasing and a finite supply of gold, demand for gold will not slow down any time soon, which drives the gold price up.
Interest Rates – The price of gold tends to reflect inversely to interest rates. As interest rates decrease, the price of gold tends to increase and when interest rates are high, gold prices tend to decrease. So when the Federal Reserve announces increases or decreases to the Federal Interest rate, this can have an impact on the price of gold.
Inflation – The dollar has become weaker each year since the US left the gold standard. Printing more money and rising costs of living means people have less purchasing power. Since 2000, gasoline costs are up 122%, ground beef prices are up 152%, and the price of gold is up 346%. The buying power of gold continues to remain steady and even outpace the dollar, but the buying power of cash continues to decrease.
ETF Trading – Gold ETFs are securities that buy and trade gold based on investor demand, and are often referred to as “paper gold.” The active trading of gold in ETFs has a small impact on the daily gold price based on supply and demand.
Geopolitical Factors – War, rising tensions, and global catastrophes have been proven to have an impact on gold. After 9/11, the price of gold in the London market rose 33% in one day. Uncertain events like these prompt people to flock to gold.
Value of US Dollar – Since the United States went off the Gold Standard, the buying power of the US dollar has decreased. Inflation has caused the cost of living to increase, and the decreasing buying power of the US Dollar leads to increases in gold.
Tracking the Gold Price in USA
There are two ways to track the daily gold price. Checking the spot price is the easiest. The spot price of gold is the cost of an ounce of new gold, and may not reflect the full value of your gold holdings, but will tell you if the value of gold is rising or falling.. The other way to track gold prices is by looking at gold futures. Gold futures are the spot price of gold for a date in the future. This is the most common way of tracking the trend of gold.
This is the most common way of tracking the price of gold.
Gold Price and Forms: Bullion vs. Coins vs. ETFs
Are gold bars or coins best when buying gold as an investment? The word bullion conjures up images of gold bars, but bullion is really any form of pure gold that is certified for its weight and purity. Gold bars are heavy, illiquid, and relatively rare in commerce. Therefore, it might be better to invest in coins as these don’t have high trading fees and are commonly offered. These coins can have an additional value called a collector’s value or numismatic value. This value is tough to identify, which is why most investors stick to widely circulated coins.
Besides bullion and coins, investors can choose to use a gold ETF. An ETF, or exchange–traded fund, trades intraday like a stock, but has the diversification of a mutual fund. Gold ETFs can invest in mining companies and gold investment management firms too, not just in gold bullion. Gold ETFs can be a great way to get exposure to gold, but they have pitfalls. For example, many gold ETFs have high commissions and trading fees. More importantly, they might have high expense ratios that minimize returns over time. Investing in gold can be a safe haven as long as you make sure you research the trading costs and fees. The last thing you want to do is lose hard–earned dollars because of unnecessary costs.
Gold and Its Relationship to the Stock Market
Gold has proven to be a secure investment that can have higher long–term returns than savings accounts or bonds. The gold price in the USA will never be impacted by the performance of single company. It also doesn’t have to please shareholders or boards of directors.
This asset can be a good way to diversify your portfolio as the current gold price moves inversely with the general market. If the markets decline, investors look for secure investments, which raises the price of gold. The VIX or fear index is another indicator of investor sentiment. When the VIX is high, people panic, sell stocks and turn to gold. Conversely, a low VIX means that people have faith in the market and the gold price can decrease.
Troy Ounces and Precious Metal IRAs
Gold has been used for centuries, and a common term called the troy ounce was created back in the Middle Ages. Troy ounces are the unit of measurement used when you invest in gold or silver. The name comes from a town called Troyes, France where the measurement was created.
Troy ounces are equivalent to 31.1 grams or 480 grains, and are slightly larger than a standard (avoirdupois) ounce, which is 28.35 grams or 437.5 grains. To put this into perspective, a standard (avoirdupois) pound is 16 standard ounces, but only 14.58 troy ounces. Troy ounces are the most common measurement standard for precious metals and are often abbreviated “t oz.”, “ozt.” or “oz. t”. If you see a precious metal’s price quoted per ounce, this always refers to a troy ounce.
Whether you’re buying gold as an investment or using it to protect your retirement funds, make sure to stay up to date with the current gold price to ensure you’re purchasing at the right price point. If you have any questions, be sure to contact Goldco to receive advice from our precious metal experts.