The gold price index, also referred to as the spot price of gold, is the “up to the moment” numerical value in dollars, of the price of one ounce (Troy ounce) of gold. This number fluctuates round the clock worldwide, and is watched as closely by entire governments as it is by financial institutions, and household investors alike. Gold is truly the world’s oldest currency, and its’ perceived value drives the gold price index, as well as a huge portion of our global economy. The gold price index is fundamentally subject to the age-old law of supply and demand. Almost all of the gold ever mined is still in use today, which means that the world’s gold supply has remained virtually constant. Gold mines add only miniscule amounts of gold to the world’s supply, so it suffices to say that demand is the operative factor in determining today’s gold price index.
Various economic indicators determine the world demand for gold. Factors like war, international policy, and debt reconciliation are all contributing elements, but the main reason for the rise in the gold price index has historically been due to the overprinting of fiat currencies. Fiat currencies have always begun as an official representation of some amount of gold. Over time, the perceived value of the currency became more important than the metal that was backing it. Irresponsible loaning and borrowing, followed by even more irresponsible over-printing of currency created vicious inflationary cycles that ultimately rendered fiat currencies worthless. Many fear that the U.S. dollar is in the same type of trouble today. Various corporate buyouts accompanied by our Treasury Department printing over 40% more money in the past three years, is reflected in today’s gold price index, which is projected to reach over $1400 by the end of 2009.
Kenneth Hansen« Previous Next »