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Ian Kennedy  -  Nov 05 10:20 AM 7 Posts 0 Followers 0 Following
What are the principal drivers of the price of physical gold?
The price of physical gold is a ‘hot topic’ these days, with what I see as a lot of price predications that seem very general to me. I would find it very helpful if readers could spell out what they think are the ‘principal drivers’ of the price of physical gold. I am not at this stage particularly interested in the ‘absolute price’ those that respond to this question think gold might rise to, or for that matter, fall to, in the coming months and years.
Topics:   Physical Gold, Physical Gold Price
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Christian Jean  - Nov 09 06:06 PM1 Posts0 Followers0 Following
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I believe the 'true' drivers of the price of gold is, as most would expect, the laws of supply and demand!

Now having said that, I'd like to point out that it is my personal belief that the current highs we've seen (approx. $1400) are NOT actually driven by such laws... for the following simple reasons:

We've never had a time in history with so many investors (world wide).  Most couldn't tell you what makes gold fluctuate, what it looks like (other than jewelery), what it is used for (commercially) or more importantly, why one would want it in their portfolio.  With the relative ease to own an investment account where gold could be traded, by means of ETF's, funds or any other derivativeby simply logging in and clicking a few buttons, people have been artificially lifting the price by buying "paper gold".

So one of the drivers is the common person (purely speculative)!


I say "paper gold" intentionally because I think it is very important to realize the difference between those who take physical delivery of their gold and those who proclaim to own gold because it says so on their monthly report.

We all know that the U.S. has a history of allowing (if not encouraging) naked trades.  Add this to the fact that gold is non regulated and traded on every continent, you can quickly see the potential for fraud.

I know that some will tell you these are simply conspiracy theories though up by others.  Maybe so, but I don't trust the system one bit.  It's relatively impossible for anyone to make an accurate inventory of all the gold being traded.  But I try to read as many gold ETF reports when I get a chance and I find all the numbers proposed just don't add up.

When someone will be able to prove that there is a multitude more of "paper gold" owned than actual physical gold in existence, I think the laws of supply and demand will suddenly kick in... big time!


Disclaimer: Yes, I own physical gold







Disclosure of Relationships with the Company(ies) referenced in this Post:
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Ian R. Campbell  - Dec 10 12:54 PM26 Posts0 Followers0 Following
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As I see things, the following are the principal drivers of the Physical Gold Price:


1.      If one believes that physical gold is a ‘safe haven monetary holding’ (or alternately stated a ‘protector of Purchasing Power’ or ‘Insurance Policy’ against economic and societal instability), the first ‘principal driver’ of the physical gold price in my view has to be ‘point in time’ and prospective Macro-economic issues which include consideration of:


·        Inflation – differentiated between ‘low stable inflation’ and higher to hyper-inflation – both country specific and world,


·        Deflation – both country specific and world,


·        Stagflation – both country specific and world,


·        Sovereign Debt Risk (e.g. Ireland, Spain, Portugal, U.S., etc.),


·        Currency Tensions,


·        Volatility – broad market, money markets, equity markets risk,


·        Changes in comparative Country Economic Power,


·        Concern with the prevailing Fiat Currency System, and


·        issues around whether the U.S.$ will continue by itself as the World Reserve Currency;


2.      ‘point in time’ and prospective Inter-Country Strive:  Wars (e.g. Afghanistan, Iraq) and Threat of Wars (e.g. Iran, North Korea);


3.      ‘point in time’ and prospective Terrorism threats and strikes;


4.      ‘point in time’ and prospective Societal Instability – from both country specific and world views as a ‘driver’ of the physical gold price;


5.      ‘point in time’ and prospective Investor (Market) ‘point in time’ perceptions of prospective returns from conventional investments – Real Estate, Equities, Debt, etc.;


6.      ‘point in time’ and prospective Government Intervention in the physical gold market;


7.      ‘point in time’ and prospective and prospective direct and indirect (through ETF’s and other ‘trading vehicles’) Trading Activity in physical gold by Financial Institutions, Hedge Fund Traders, and Retail Traders;


8.      overall, the ‘point in time’ and prospective Supply and Demand factors related to physical gold; and,


9.      the ‘point in time’ psyche of those who buy and sell gold.


Note that I have emphasized ‘point in time’ and ‘prospective’ for each of what I see as the ‘principal drivers’ of the physical gold price – other than ‘psyche’ since it inherently encompasses both.  I believe anyone who holds, or is contemplating holding, physical gold needs to monitor each of the foregoing things on an ongoing basis as best they can – on the theory that if you purchase any asset (be it physical gold, share equities, land, etc.) every day that you ‘hold it’ and do not ‘sell it’ you have once again made the decision to ‘buy it’.
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