The real price of gold per gram changes throughout the day in response to transactions carried out through an anonymous auction every 45 seconds. The buying and selling of gold carried out by investors, central banks and consumers around the world affects the price of gold per gram. Since gold tends to maintain or appreciate its value and the currency is subject to significant losses in purchasing power, investors protect their portfolios with gold. The official market price of gold is an important tool for everyone involved in the gold industry, from miners to bankers to pawn shops.
Investors can also use gold bars to protect their retirement, as some coins and ingots are eligible for a self-directed IRA. While cultures have appreciated gold for its beauty and view it as a symbol of wealth, investors today buy gold to diversify their portfolios, as a hedge against inflation and to protect against currency devaluation. Gold ETFs are backed by physical gold, but because they are traded electronically, investors don't have to insure or pay for gold storage. After World War I, this gold standard largely collapsed, as countries became reluctant to trade gold with other nations.
Gold ETFs must be declared to the IRS, so holders have less privacy than if they had purchased physical gold. Sellers rely on these prices to set their own prices for gold and items that use gold as part of their manufacturing process. If you were to average the net value of all the gold futures contracts currently trading for the nearest month, you would get the spot price of gold. Changes in the spot price of gold affect the value of gold bars, which will always be worth the market price for their metal content.
Since the first gold rush of 1697 brought gold to London from Brazil, the city has been a stronghold of the bullion trade. With a gold ETF, shareholders are not the direct owners of physical gold, but are entitled to make a profit from it. It is widely accepted that gold is a good investment, but less is known about how gold prices are determined and what affects the daily price of gold. What helps boost the price of gold, one of the most precious metals in the world, is the demand for gold, the amount of gold reserves in the Central Bank, the value of the US dollar, the desire to keep gold as a hedge against inflation and currency devaluation.
Knowing how the gold market works and what determines gold prices can help you invest wisely in the precious metal.