July 6, 2020

The new dynamics of international crude oil price

As someone whose business revolves a lot around gold — from jewellery to gold loans —I have always followed the price of gold closely. This will come as no surprise given that gold is bread and butter for us. Over the years, I have found the study of gold price to be a fascinating subject not least because this is one subject where the opinion of the most learned economist counts for no better than that of the layman as far predictions about future price movements go.

Unlike other commodities, gold has very little intrinsic value derived from the productive use of the metal. It makes forecasting future prices all the more difficult. Gold is of little use to industry and the bulk of the demand for physical gold comes from jewellery. Historically, gold served as the currency for trade but with the advent of paper currency, it is no more so. All the same, even today, gold continues to be a store of value across the world (from the first world to the third world) because governments have not hesitated to debase their paper currencies by printing more currency to pay for ever expanding budgets. And that is why, these days, gold has become the object of speculative demand, which means we have people buying and selling gold not because they want to own the metal but as a substitute for a depreciating currency, being the more dependable store of value in these turbulent times.


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