Gold price in the UK has been volatile as speculators, hedge funds, and large investors keep dumping millions of ounces as pessimism is on the rise. But experts can’t decide which way the prices will move.
Recently, gold saw the fasted reduction in ten years, but then again the government has only been collecting the data since 2006.
The price of gold has been significantly impacted by speculation that the US Federal Reserve will increase interest rates before the end of this year. It’s a familiar pattern, as when interest rates rise, non-yielding gold usually loses ground to income-bearing assets.
But even though the sentiment towards gold may be diminished, its current net position leaves large investors with something to be positive about with 13.7 million contracts. This is mainly supported by the physical demand for the commodity in emerging markets like India and China.
Gold price in the UK is also affected by geopolitical events such as Brexit and the upcoming US election. In this scenario, a win for the democrats can see a boost in the markets, so things might quickly turn around.
But at the same time, a democratic win will most certainly mean an interest hike. This, in turn, often turns bearish for gold.
The health of an economy can be ascertained from the price of gold. When the UK was on the gold standard, this precious metal was even more important.
When the price of gold is high, that signals that the British economy isn’t healthy. This is because investors will buy gold to protect themselves from inflation or economic crisis.
So when the price of gold is low in the UK, you can be assured that the economy is doing quite well. This is because investors are looking at other options that can yield a decent return. These can be investment options such as bonds, stocks, and real estate.
Gold price in the UK is determined by much more than the laws of supply and demand. The primary reason for this is because the stockpile of gold is 60 times greater than what’s mined every year.
So minor changes in the mining process and output won’t even have a noticeable impact. To add to this, there is also a consistent supply of recycled gold. So when the price of gold is one the rise, the same will be true for recycled gold.