The price of many metals such as copper, iron ore and aluminum have dropped drastically in the last year or so as the financial crises has hit. But the price of gold has hit new highs - why is that, and will it continue? Read on to find out what drives the price of gold and why it behaves so differently from other metals.
Gold's price is not driven by industry. Although there are plenty of industrial and high-tech uses for the metal, the main use for gold hasn't changed for centuries - gold is still seem primarily as a store of wealth. Gold was one of the world's first currencies and one of the most enduring. Right up to the 1930's the US dollar, pound Stirling and other major currencies were tied to the "gold standard". The name of the British currency says it all - take your pound note in and get a pound of gold. Well inflation had seen pay to the pound but until fairly recently you could replace your intrinsically worthless paper money with something of real value - gold.
When societies collapse in the face of war, or financial systems face hyper-inflation - people return to the ancient standard of wealth - gold. Some have never left it. Wander the gold markets of the Middle East or India and you will see the demand for pure 24k gold jewelry - beautiful to look at and designed to be worn - but also can be melted down and used as cash if needs must.
In the West pure gold jewelry has never been quite as popular - most wedding rings are still made of gold but usually 18K or less -not pure gold but more practical because the resulting piece is less easy to mark and damage. Still indestructible though - friends of mine lost everything when the caravan they were living was burnt to the ground. But the sieved through the remains - and found the molten remains of their wedding rings and got them remade!
So rather than pure gold jewelry you will see many people today look at investing in pure gold coins, bullion bars, or in promising gold mining stocks. What they are picking is that as times get tough human nature as we turn to pure gold as safe investment in uncertain times.