Gold: Understanding Supply , Demand Plus Impact on Economy

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  • Topic: Gold, Global Peace Index, Liberal democracies
  • Pages : 17 (4774 words )
  • Download(s) : 48
  • Published : December 26, 2012
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Contents
1 Introduction ..................................................................................... 3 2 History and the GOLD heritage ...................................................... 5 3 Study of the demand mix & USES of gold....................................... 7 - Historical Consumption patterns........................................................... 8 - Official Gold holdings …………............................................................ 9 4 Gold Supply details ………………………. ..................................... 10 -demand supply equilibrium…............................................................ 12 5 Factors impacting gold prices ...................................................... 14 5.1 Gold and the US dollar ............................................................................... 14 5.2 Gold and financial stress ............................................................................ 15 5.3 Gold and political instability ...................................................................... 16

6 Conclusion ..................................................................................... 17 7 Bibliography & Appendix ..................................................................... 18

Introduction
Gold represented by ‘Au’ (Aurium) with an atomic number 79 is one of the most inactive metal. It has a fascinating history of use in a wide range of applications besides being the premium metal for making exquisite jewellery. With the extensive research on this metal, the future will see gold being used in multifarious products and processes. This report discusses the demand and supply parameters of gold plus provides an insight on inflation in terms of changes in the value of gold. Gold’s many valuable properties lead to its exclusive technological applications .The story of gold is as rich and multifaceted as the metal itself. On one hand, wars have been fought for it and on the other it has been a symbol for declaration of love. Ancient Egyptian and modern astronomers use mirrors coated with gold to capture images of the heavens. The demand for this precious natural commodity occurs in many geographies . Around 60% of today’s gold becomes jewellery, where China and India with their mounting economic power are at the front position of consumption. In East Asia, India and the Middle East, gold has a potent cultural focus, which accounted for approximately 70% of the world’s gold jewellery in 2009. Gold mining companies operate in every continent of the world. This broad geographical spread means that issues in any single region are unlikely to impact the supply of gold. Beyond mine production, recycling accounts for around a third of all current supply. In addition, central banks can also contribute to supply in case they sell part of their gold reserves. It should be noted that after 18 years as net ‘sellers’, central banks are now effectively net ‘buyers’, causing not only a significant decrease in supply but also a corresponding increase in quantity demanded. The price of gold is usually measured in US dollars per troy ounce. Price of gold has risen every year since 2001 from its low of around $250. From then until November 2010 the gold price has risen to over $1400, a cumulative rise of 460%. Five of the years between 2002 and 2010 were marked by annual percentage increase of 20% or more. The relative performance of gold and oil as inflation indicators can be traced back to one plain fact: in order to use gold for its main economic purpose (the preservation of wealth) it is necessary only to hold it. On the other hand, in order to use oil for its main economic purpose (the production of energy) it is necessary to consume it – exactly to destroy it in the process of converting it to energy. New supplies of oil must be found to replace all the oil that gets used, whereas the supply of gold is unaffected by its use. In simple terms, the value of oil in terms of...
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