Dan Gable once said: “Gold medals aren’t really made of gold. They’re made of sweat, determination, and a hard-to-find alloy called guts.”
In his own definition, gold’s essence translated to the person’s special characteristics. However, majority of the world perceives gold as a value commodity.
“What makes gold so valuable?”, you may ask. For starters, it lasts for a long period of time, it can be easily manipulated, and its appearance is very appealing.
But aside from this, gold is a rare element because no mine has an unlimited supply of it. Once all the gold is sold and spent, the mining company’s stock will fall. Any efforts to get more gold will affect the company’s wealth.
Gold’s rarity makes it more valuable than other common elements such as aluminum or iron. Its prices are not set by a single organization, rather they are influenced by the cost of production and the amount people are willing to pay for it. For instance, when the demand of gold is relatively high at a given base price and the competition is higher than expected, it is just right to increase the base price in order to regulate the demand of gold. And if not so many people are interested in purchasing gold, its price will stay closer to its actual production cost. Whether you like it or not, we are currently observing the latter statement about gold.
Gold’s price has dropped by about 1.4% last Thursday (14th April) – that is US$1,228.70 (S$1676.32) per ounce. This is in conjunction with the rising Asian shares and the strengthening of US dollar. Moreover, regional currencies weakened against the greenback after the country’s central bank set the rate of appreciation of the Singapore dollar policy band at 0%.
According to Gold Rate 24, a website that partakes information about the gold’s prices around the world, an ounce of 24K gold is priced at S$1,672.04 (US$1,226.99) while a gram of 24K gold is priced at S$53.76 (US$39.45) as of today. A substantial drop has been seen within 30 days from S$1,702.81/oz to S$1,672.04/oz.
HSBC analyst James Steel was quoted saying:
“Gold is weakening on a recovery in investor risk appetite. The sharp (equities) rally and the leveling off of gold-ETF demand recently argue for some period of price consolidation.”
Steel’s claim of the lowering investor risk appetite towards gold is supported by the figures of the world’s largest gold-backed exchange-traded fund – SPDR Gold Trust. Assets of SPDR Gold Trust fell 5.05 tones to 806.82 tones last Thursday, its lowest in a month.
The demand drop of gold affects the prices of other valuable elements such as silver, platinum, and palladium.