Tuesday, July 8, 2014

3 Market Forces Affecting the Demand for Gold

The gold reserve is a factor affecting a country’s economic dominance and influence. It has long been a prime mover in the economy, and is considered as one indication of a country’s financial stability. From an average consumer’s level, gold also plays a significant role in terms of individual finances. During tough financial situations, gold could become a person’s fallback. Even a simpleton today can easily participate in the gold trade by selling gold; and the proceeds s/he get from his or her personal gold ownership gives the person easy cash just when s/he needs it. However, gold trade was never an easy industry especially for a person who is going to sell gold for the first time. There are a lot of things to know first before anybody can assure good returns from selling gold, like market forces that affect the demand on gold. Hence, if you are planning to sell gold in the near future, take note of the following forces that might affect how well or bad your gold will sell:
1.       New competitors – Gold has had its shares of ups and downs primarily due to the emergence of strong competitors in the economy, such as oil and stocks. On a smaller scale, finding dealers and buyers of scrap gold can become difficult once the buyers discover a different metal or item with potential resale or recyclable value. Most dealers and buyers will look for gold that can be melted and made into a different form, or those that can be resold as they are. Demand for scrap gold will definitely decline once a potential competitor, like silver, hits it big in the precious metal trade.
2.       Availability of substitutes – One of the strongest factors that keep the demand for gold strong in today’s economy is the lack of competitive substitutes. While there are lots of similar metals like silver, platinum, and brass; gold remains the standards as nothing appears to be a worthy alternative. Over the years, gold also remained as a universal currency; hence, the price of gold in America will not vary drastically in other countries.
3.       Inflation – The ability of people to spend is of course, one of the most important factor affecting the demand for gold. Inflation determines the consumers’ and industries’ purchasing capability. An affirmative inflation rate could increase the demand for gold as buyers will have greater capabilities to spend their money on whatever investment they choose. Moreover, it also allows them to acquire as much commodities, services, or investments they wish to have for less. Hence, good inflation could improve demand, which also means that good inflation can make your gold scrap  more sellable.

In selling gold as in selling any other commodity or service, it is always best to understand the market and how the system works. The gold trade was never an easy industry. It had its share of extreme fluctuations in the past, and there is no guarantee that it will remain on its current pace in the long run. However, understanding the factors that are affecting the demand for gold will greatly help you understand when you try to sell your gold. Keep the aforementioned tips in mind and determine what could make your gold scraps sellable or otherwise. 
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