Category: Commodities

As the name suggests, price of any commodity paid at the time of purchase is known as spot price. Similarly, the price of gold, any quantity, that you pay immediately on purchasing it is known as spot gold price. In some cases, price is paid a day or two in advance. In short, spot gold price is the current price of the gold in the market. Gold is one of the best investments as it provides guaranteed returns in long term. Besides, this investment helps you to hedge against inflation. A currency can be devalued by the government. The stock market can collapse due to poor economic conditions. Gold, however, is the only commodity that’s traded all over the world. Hence, it doesn’t lose value as easily as other investment products. Gold market is, however, quite volatile in short run. The spot price of next day cannot be predicted as, in short run, the prices are based purely on speculation.  [...]

With the Oil price hitting new high of $82 per barrel last month the focus is again on the impact of dollar weakness on oil prices. Last month also saw the US dollar falling to new lows against basket of currencies. So how is that the dollar weakness causes high oil prices. Theoretically oil prices are determined by three factors: Current supply in terms of output, especially the production quota set by OPEC. Oil reserves, including what is available in U.S. refineries and what is stored at the Strategic Petroleum Reserves. Oil demand, particularly from the U.S. (as estimated by the Energy Information Agency) With the US dollar being the currency of choice in global crude oil trade, dollar devaluation creates several problems for the world oil industry. Oil producing countries receive their oil revenues in US dollars but use other currencies to buy goods and services from  [...]

As the gold prices soar to new levels the question still remains whether the gold is worth the price.  Is this the right time to invest in gold. Will gold prices continue to rise in future or is it another asset bubble. To answer these questions lets understand the dynamics of gold market. Like any other commodity gold price is determined by the forces of demand and supply. The supply of gold is more or less constant. It may increase slowly in the long run as new mines become operational and new technologies are developed to unearth gold. Hence the increase in the price of gold is entirely due to increase in demand of gold. So why is it that the demand for gold has suddenly increased? Demand for gold has increased cause other investments have lost their glitter. People are choosing to buy gold because they are looking for an investment that will not suffer when the alarm bells next  [...]