Check out some similar questions!

Kahani Punjab · Sep 4, 2011, 04:26 AM

The rate, I mean price, of gold (one of the most precious metals on earth) is shooting up day by day, esp. in India. I want to know as to why it happens, I mean, within last one year, in India, its rate per 10 grams has jacked up from Rs.18,ooo to Rs.28,ooo per tola (10 grams).

How is gold connected with dollar, GDP, national inflation and other financial issues? Please explain somebody.

joypulv · Sep 4, 2011, 04:48 AM

Like any financial investment, it's related to all that and more, and if someone out there really knows, he or she is very rich. Politics and unrest in the gold producing countries, money flowing out of other areas, new mining techniques, needs in technology, governments selling off some of their hoards, and so on. Vast areas of the world like the former USSR and China may be buying more (as well as India, where gold is even the poorest person's treasure, but that's always been true). I suppose you could subscribe to Bloomberg Reports or all those gold newsletters, but just going by what I read online, predictions are all over the place as usual.

I'm as puzzled as you are. All those years at $300 USD/ounce, now hitting almost $1900.

Fr_Chuck · Sep 4, 2011, 05:33 AM

Doomsday people who believe it will be the only thing of value, people who are still looking for a get rich quick.

But just like it goes up, we have seen it go down in past years just as fast, There were times when it went down in value greatly. It lost about 1/2 its value in a week once in the 1980s

Kahani Punjab · Sep 4, 2011, 06:50 AM

Originally Posted by Fr_Chuck

But just like it goes up, we have seen it go down in past years just as fast, There were times when it went down in value greatly. It lost about 1/2 its value in a week once in the 1980s

Can we/I hope it getting down again, and if yeah, when is this 'good' news expected?

Fr_Chuck · Sep 4, 2011, 07:05 AM

Dropping down is not really "good news" since millions of people will lose fortunes. And many may lose everything they own.

Kahani Punjab · Sep 4, 2011, 07:31 AM

O, I saw.
But, here in India, we the common people feel relieved whenever, even as it happens only rarely, the rate of gold gets hit, rather than getting a hit.

That's why, I said so. I on my part want to own/purchase some, but since when I made my mind, its rate is jacking up, and that too very sharply.

excon · Sep 4, 2011, 07:41 AM

Originally Posted by Kahani Punjab

I want to know as to why it happens,

Hello K:

It's simple - or it's not. I can't tell. But, since I'm not real bright, I CHOOSE to think it's simple. That way I can figure it out. So, here is my SIMPLE explanation. Gold and silver are REAL money. They ALWAYS have been, and they ALWAYS will be. Governments TELL us they aren't, but we seem to know better. That's especially true in your country.. Indians understand the intrinsic worth of gold. Smart people... But, I digress...

Gold and silver aren't really going UP... It's that PAPER denominated assets are going DOWN. That's because they can INCREASE the supply of paper money (print it), which they are doing right now as fast as they can. When there's LOTS of dollars, their value goes down. For example, if you EXCLUDE paper money from the equation, in 1963, a silver quarter could be exchanged for a gallon of gasoline. Today, it STILL can be. The VALUE of those two commodities DIDN'T go UP, the dollar went down. In fact, most commodities haven't changed prices relative to each other.

So, as long as they print more PAPER money, it becomes worth-less, and eventually becomes worthless. That'll never happen with gold.

What I said above is TRUE in the long run... It's the SHORT run where people can get hurt.. There are bumps that can wipe people out... Was the rise in the gold price a straight line?? It was NOT. The Padre reminds us that it crashed in the 80's. Will it crash again or will it go directly to $2,400 and STAY there? Is $5,000 gold possible? I don't know. If you have LONG term assets, gold is a good place to keep them in. But, what it will do in the short term is anybody's guess. Personally, I'm still a buyer.

excon

Kahani Punjab · Sep 4, 2011, 07:51 AM

Is there any possibility of the publication of papers (I mean currency) being controlled or reduced, so that the rate of gold comes 'down'?

excon · Sep 4, 2011, 08:11 AM

Originally Posted by Kahani Punjab

Is there any possibility of the publication of papers (I mean currency) being controlled or reduced, so that the rate of gold comes 'down'?

Hello again, K:

Sure. That's what the government is TRYING to do right now. But, they're in a quandary.. When you INFLATE too much, you cause bubbles. When the bubbles BURST, deflation is a real possibility.. That's when prices decline, like houses and stocks did. One could argue that wages have been declining for a decade, too... DEFLATION is what caused the GREAT DEPRESSION, so they're fighting that possibility with everything they've got by charging up the PRINTING PRESSES. That, of course, puts us in danger of an INFLATIONARY depression... Germany had one of those, and Hitler rose out of the ashes.

I don't know who's going to win in the short term, but the stakes are BIG!

excon