Gold Is A Safe Haven
Gold is a safe haven, particularly during unstable economic conditions. Even as inflation shoots up, investing in gold means you are safeguarding the value of your savings, if not adding to your wealth. For thousands of years gold was the global currency. Since 1980's gold lost this status, but remained the most favorite commodity the world over.
As in the case of any commodity, the price of gold is influenced by supply and demand forces. The supply of gold is inelastic. Whereas demand, influenced by socio- economic and demographic changes in the developing countries always outpaced supply.
Demand for gold is widespread across the world. East Asia , the Indian sub-continent, Italy, Turkey, USA and China together command more than 50% of the total demand for gold. The fundamental factors that push gold demand are the passion for gold as a commodity, investment demand for wealth creation, industrial demand as a component and the supply constrains.
In terms of retail value, USA is the largest market, while India is the largest consumer. Jewelry accounts for more than 75% of gold demand. And, it is mainly driven by affordability and desirability of consumers. The demand for jewelry in India is supported by cultural and religious tradition. The demand surges particularly during the marriage season in India that begins from December through May, as the the Jewelry merchants starts piling their stocks.
Reports say that gold prices rose 21% in 2007 year-over- year, but touched its lowest in about eight months in August this year. This was attributed to the temporary rebound of the US dollar, as gold and oil are known to move in tandem against the dollar. Oil price also slumped off its peak of $147 a barrel in July to $112 a barrel in about a month. Meanwhile, the US dollar rose 5.6% on August 15 suggesting a belated recovery which will likely prove wrong according to subsequent developments. Experts say that the slide in gold is only temporay and its long- term outlook remains as strong as ever before.
