When we think about crises, to take even the current one, or when inflation is rising, then Gold becomes desirable. Gold has, since the human species found it, a mystical aura and fascinates everyone.
Which special character forms gold? Of course, one of our first systems was based on gold coins or coins made of material with a value. Material of value can be also copper, silver and some others.
Second is, that gold is known in several cultures, so it will be and is accepted in almost all parts of the world. There was also a time when the volume of money was rising up and a percent of it had to be hold by a national bank in gold. This is known as the Bretton Woods gold fixing / standard. But this standard was canceled after a time and the money made of paper was starting to rise without any limit.
The rising volumes of money without any value accept this one which is printed on it and given by state. These circumstances were also reasonable in several cases in the history of inflation.
Uncontrolled inflation will lead automatically to a change in currencies. Any change in currencies will have distrust from the side of the citizen as result. Almost any country and culture experienced this at least once. So, people had to learn to deal with it over generations. Basically, they had to go just back on times where money did not exist. In this time each individual had also to trade the own produced good or service for any other goods needed. Without money, it was trade-market goods for goods or services. Without doubt, this form of trading is quite complicated and in an advanced world like ours, almost impossible.
Also, in these times, some goods were of course more likely to trade or had a higher value than the others, like alcohol drinks or tobacco. Materials of value like gold, silver, diamonds, pearls or jewelry could count in those times also as currency. Most likely because they were easy to transport, part and it they did not spoil. In order to illuminate some factors which made it necessary to have a currency instead to trade goods vs goods or services, let’s think and investigate the following example:
Imagine that you would own a cow, but You want to have a couple of eggs. This could lead to some difficulties.
Another group which mostly influences the trading price of gold is the investors. A great number of professional investors track the gold price via different products which are available over exchanges but without any requirement of physical gold.
Banks and other investors provide services through an investor which is holding, for example, a portfolio of S&P 500 stocks and can trade the future growth for that one of gold. The counterpart in this example must not hold any gold, because any positive return must be paid in the defined currency.
This is a process of literally creating money out of money.
The demand of gold is mostly affected by two groups: the national banks and the professional investors. So, these two groups are most likely reasonable for the price of gold. National banks never speak open about arrangements or plans to buy or sell gold, because this would have a strong impact on the markets.
The other groups, the investors, can create giant demands of gold without that anyone sees physical gold.
With the knowledge of this, we will also understand that the price of gold is very unstable.
Over generations it was set in our minds that gold has a value which holds over decades and crises. These are the reasons why gold is a worldwide known currency until these days.
| Rike / pixelio.de |
But why is it so
Some specialists say that gold is an alternative currency or it is the authentic currency. We will not go deeper in this debate at this point. Our currency and also our system of National Banks would hold enough stuff for a new series of articles.Which special character forms gold? Of course, one of our first systems was based on gold coins or coins made of material with a value. Material of value can be also copper, silver and some others.
Second is, that gold is known in several cultures, so it will be and is accepted in almost all parts of the world. There was also a time when the volume of money was rising up and a percent of it had to be hold by a national bank in gold. This is known as the Bretton Woods gold fixing / standard. But this standard was canceled after a time and the money made of paper was starting to rise without any limit.
The rising volumes of money without any value accept this one which is printed on it and given by state. These circumstances were also reasonable in several cases in the history of inflation.
Uncontrolled inflation will lead automatically to a change in currencies. Any change in currencies will have distrust from the side of the citizen as result. Almost any country and culture experienced this at least once. So, people had to learn to deal with it over generations. Basically, they had to go just back on times where money did not exist. In this time each individual had also to trade the own produced good or service for any other goods needed. Without money, it was trade-market goods for goods or services. Without doubt, this form of trading is quite complicated and in an advanced world like ours, almost impossible.
Also, in these times, some goods were of course more likely to trade or had a higher value than the others, like alcohol drinks or tobacco. Materials of value like gold, silver, diamonds, pearls or jewelry could count in those times also as currency. Most likely because they were easy to transport, part and it they did not spoil. In order to illuminate some factors which made it necessary to have a currency instead to trade goods vs goods or services, let’s think and investigate the following example:
Imagine that you would own a cow, but You want to have a couple of eggs. This could lead to some difficulties.
These days
Let’s go back to the mystery of gold. Up to these days it is not used exclusively as an alternative currency, it is also necessary for the jewelry production, technologies, cables, medicine and many other things. The highest ask comes other than probably expected from the national banks and not form the industry. National banks still keep a very high quote of the available volume in their safes and they are still building their amounts up. Second in line of gold consumers are private persons, which ask for traditional reasons for it. Gold is very popular in the Arabic countries and India.Another group which mostly influences the trading price of gold is the investors. A great number of professional investors track the gold price via different products which are available over exchanges but without any requirement of physical gold.
Banks and other investors provide services through an investor which is holding, for example, a portfolio of S&P 500 stocks and can trade the future growth for that one of gold. The counterpart in this example must not hold any gold, because any positive return must be paid in the defined currency.
This is a process of literally creating money out of money.
The demand of gold is mostly affected by two groups: the national banks and the professional investors. So, these two groups are most likely reasonable for the price of gold. National banks never speak open about arrangements or plans to buy or sell gold, because this would have a strong impact on the markets.
The other groups, the investors, can create giant demands of gold without that anyone sees physical gold.
With the knowledge of this, we will also understand that the price of gold is very unstable.
Conclusion
The conclusion about the mystery of gold is most likely set out by the instability of our currency system and the fact, that it is build or made out of nothing with a real value. Note, except of the value of paper and ink.Over generations it was set in our minds that gold has a value which holds over decades and crises. These are the reasons why gold is a worldwide known currency until these days.
