Gold Profile
Introduction
Gold is the oldest precious metal known to humankind. Gold has a place in history regardless of the country
of origin. The precious metal acquired its high value since prehistoric time and was most probably the first
metal used for ornamentation and rituals.
The peculiar aspect of gold is that it is used as a commodity (production of jewellery and industrial
applications), and a financial asset, as it can be used as a store of value. As a financial asset, the demand for
gold would be a function of the current and expected price of gold, the opportunity cost of holding gold
(which could be the rate of return on a risk-free asset, such as U.S. Treasury bills), income, expected future
inflation, and overall financial market conditions.
History has clearly proved that gold prices are famous for being sensitive; in the seventies they rose sharply
when the United States ended restrictions on private gold ownership. In the late nineties, it fell sharply after
Bank of England announced that it was going to sell gold reserves. Rising uncertainty in the global economy
has forced the investors to safeguard their wealth, which is clearly evident from the recent spike in the gold
prices (Ref: Chart 2). Gold assets in Exchange Traded Products (ETPs) owned nearly 70 million ounces (or
2,150 tonnes) of bullion, worth US $ 96 billion at the end of November 2010. Investors also prefer to hold
onto gold because of the yellow metal’s potential to be a store of value and less volatile corresponding to
other asset classes like equities and bonds.
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