Gold has been a popular investment product for centuries. Generally, gold jewelry, such as necklaces, rings, and bracelets, is more popular among women as both jewelry and investment.
However, the most suitable type of gold for investment is gold bullion or precious metal. This is because gold for investment should be pure gold without any alloys. The purity level of gold is 24 karat, or 99.00-99.99%. Therefore, pure gold, or 24 karat gold, has a higher purchase and sale price than alloyed gold with a purity of 18 karat, 22 karat, or 23 karat, which is commonly used for jewelry.
Like any investment product, pure gold bullion purchased also has a certificate recognized by the international market. Gold is also considered a low-risk investment product because its price is not affected by inflation. This differs from the value of money held in a savings account, whose value can be eroded or reduced by inflation.
Regarding price, gold prices fluctuate daily. These changes are determined by the value of gold on the international market. Buying gold bullion is not expensive, because you can buy gold bullion (precious metal owned by PT Aneka Tambang) in fractions (grams) whose value can be adjusted to money.
5 Factors Driving Gold Prices
Similar to stock prices, foreign exchange rates, and other financial assets, gold also experiences daily price fluctuations. Although the price of pure gold is not affected by inflation, other factors can influence these fluctuations. The following are the factors driving the price of pure gold.
USD Exchange Rate
Gold prices generally move inversely to the price of the US dollar (USD). If the value of a currency experiences inflation, the price of basic necessities will also rise. Consequently, the money supply will increase, and the exchange rate of that currency will decline.
When this occurs, most people will generally shift their investment instruments to gold. This is because the price of gold tends to be higher, or at least more stable, than the value of the currency. In other words, the lower the value of money, the higher the price of gold.
World Political Situation
Naturally, the world political situation will affect various aspects of the economy, including stock prices, currency values, and even gold. This generally occurs when countries are at war or in conflict.
For example, if a country is at odds with the USD, stock values, both in the US and the affected country, will fall because investors tend to withdraw their assets from the stocks in question. With this withdrawal, they tend to shift to gold, which is considered more stable. Consequently, demand for gold increases, and gold prices also rise.
Wealth Protection
This factor in gold price movements is closely related to the two factors mentioned above. This is because gold investment is an instrument that is not eroded by inflation and tends to be stable.
If inflation occurs, an investor who does not invest in gold will face the risk of losing the value of their assets. However, if they also invest in gold, at least a portion of their assets will still be protected.
Furthermore, investors can also protect their remaining assets that have been affected by inflation by transferring them to gold. This way, the value of their assets will not decrease drastically. Gold can also be used as a "safe haven" asset when inflation-related issues arise.
Gold Reserves at Central Banks
Similar to investors, central banks also need to diversify their assets. To safeguard state assets, this is also necessary.
So, how do gold reserves at the Central Bank affect gold prices? This is also related to market demand or inflation. If inflation occurs or demand is high, gold at the Central Bank will circulate significantly, thus increasing the price.
Supply and Demand
From the factors above, it is clear that gold prices are indirectly related to supply and demand. Whatever happens in the economy, if it causes increased demand, the product in question will also experience a price increase. Similarly, with gold, the price will increase if demand for gold increases.
Prices increase not only due to inflation or economic stability, but demand for gold will also increase if demand for gold jewelry increases. Although jewelry generally does not use pure gold, the manufacture of gold jewelry will also affect the price of pure gold.
Besides the jewelry industry, other industries can also use gold, such as the electronics, computer, and even healthcare industries. This is due to gold's excellent conductivity (ability to conduct electrical current), flexibility (easily forged and shaped), and resistance to rust when reacting with other elements.
It's clear that gold isn't only used for investment or jewelry; it's also used in many industries. If gold is needed across all sectors, demand for it will increase, and prices will rise.
This is also related to the available supply in Indonesia. Although Indonesia has its own gold mines, this doesn't necessarily mean the country's gold supply is high. This is because gold production and demand are also high, which in turn reduces the country's supply. The lower the supply, the higher the price of gold.
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