Hedging Against Rising Gold Prices using Gold Futures

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Gold Spot Price Spot Change
Gold Price per Ounce $1,719.05 43.45
Gold Price per Gram $55.27 1.40
Gold Price per Kilo $55,268.74 1,396.95

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The Mystery and Wonder of Gold Prices

Gold prices are constantly changing, which keeps investors checking the price of this precious metal every morning. Despite this level of speculation, gold continues to be the most popular investment precious metal. For centuries, gold has been a mysterious symbol of value and wealth. Learn more about gold prices and what makes this precious metal coveted by so many people around the world today.

A Brief History of Gold

Dating back as far as 600 BC, gold has been used as money and to preserve wealth. Today, mints produce gold bars and bullion coins for dealers to sell to buyers. The first coins with gold were struck in Asia Minor.

However, gold was used during the period of Grecian history before and during the time of Homer’s life. During the thirteenth and fourteenth centuries, European nations starting minting gold coins rather than their earlier preference of using silver for coinage.

The gold standard for money was used throughout the years of industrial economies in the nineteenth century. Gold certificates and bills were added to this circulating stock of money based on the value of gold. After World War II, the gold standard was replaced by convertible currencies with fixed exchange rates based on the Bretton Woods system.

Starting in 1971, the USA refused to redeem its dollars in gold because excessive government debt and money printing had caused the gold price per ounce in the free market to rise way above the fixed redemption price of gold. Since the dollar was backed by gold up to that point and had gained the status as the most important reserve currency, most other countries around the world had already abandoned their own gold standards and instead pegged their currencies to the dollar.

The financial turmoil and debt problems in recent years have reinvigorated the debate about returning to a gold standard, particularly as gold prices have risen sharply.

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Gold Price: The Pure Beauty and Value of Gold

As an alloy, gold content is measured in carats. Pure gold is 24k. Gold is always considered the most desirable precious metal, even as the prices of certain platinum group metals have been higher. The perception of gold brings to mind wealth and comfort, beyond that associated with stocks, equities and money. Buying gold is a way to diversify risks, as the stock market can be unpredictable. The safest, most reliable play on gold prices is to own physical gold. However, investors also use contracts, futures, and derivatives to build financial portfolios exposed to gold prices.

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“The safest, most reliable play on gold prices is to own physical gold.”

The globalist International Monetary Fund (IMF) in Washington, D.C, maintains statistics of national assets reported by countries around the globe. This includes gold holdings. The price of gold is reported per ounce. An investor refers to a 24-hour spot gold price chart. The price per ounce is reported in real-time as 24-hour trading ensues worldwide. Before investors decide to buy gold from a dealer, it is wise to refer to trading charts for AM and PM values – or better yet, reference live global spot prices – to ensure accurate pricing. While is can be impossible to predict the value of future markets, live reports help buyers make a prudent purchase. The use of an online calculator can also be helpful.

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Gold Price and Investment Demand

Commodities are basic goods that can be interchanged with other commodities of the same type in commerce. Gold is not specifically a currency or a commodity. Since it has the features of both, it is best described as “commodity money.” Trading happens on the spot market in addition to the future market used for commodities. Gold is not reliant on a single central bank or government. For this reason, precious metal investments are used to hedge against inflation and financial turmoil.

What is the Gold Spot Price and How is it Determined?

Traders determine the spot price of gold on futures exchanges. Metals contracts change hands in London and Shanghai when U.S. markets are closed. But the largest and most influential market for metals prices is the U.S. COMEX exchange. The quote for immediate settlement at any given time is effectively the spot price.

Spot (paper) prices can sometimes diverge from real-world pricing in the markets for physical precious metals. For example, during periods of extreme stress in markets it may be impossible to obtain physical metal anywhere near the quoted spot price. Premiums on retail bullion products may surge as a consequence. When the physical market diverges from the paper market, wholesale over the counter prices may be more realistic than spot prices.

Why Does the Gold Price Fluctuate?

Excessive money printing tends to drive gold prices up, as there are more currency units chasing basically the same number of gold ounces. On the other hand, the price of gold does not tend to perform as well as compared to other assets when governments are behaving responsibly and living within their means. Geopolitical conflict, mine supply, and demand for gold in jewelry also have a bearing on gold prices.

An investor will seek to make a profit, but there is always a risk of loss with any investment. The most successful investors seek updated information daily, each week, and every month before they start to trade, sell, or purchase gold. The published dollar amount rates will constantly change, so buyers will expect to gain and lose along the way. Before investing, check indexes such as the NASDAQ for the latest rates based on the USD. Review the end of the day Commodity Future Price Quotes for Gold (COMEX) and determine the bottom line using online calculators. Rely on facts rather than the opinions of a writer at a blog website, tweets from a social media account you follow or commentary at the office. A random comment may not be valid while facts and figures are verifiable. Rather than making a quick response to a conversation, take the time to do your own research.

What Causes the Price of Gold to Go Up?

A hundred years ago, gold sold for just $20 per ounce. In recent years gold has traded between $1,200 and $1,900 per ounce. That’s a huge move up in nominal terms over the past century. Yet in real terms gold prices today aren’t much different from what they were when they were last quoted at $20 an ounce.

It’s not that gold has become so much more expensive. It’s that the currency in which gold prices are quoted has depreciated so much. (The U.S. dollar has lost nearly 97% of its value since the Federal Reserve was created in 1913.)

Over time, gold’s value in terms of purchasing power stays relatively constant. Of course, there are major cycles wherein gold can gain or lose value dramatically due to supply and demand issues, speculation, or manipulation. But as long as the dollar keeps losing value, gold – the ultimate money – can be expected to ultimately reflect that depreciation by carrying a steadily higher price tag.

What Was the Highest Price of Gold per Ounce Ever?

Gold prices hit an all-time high of $1,900/oz. in August 2020. However, that nominal high wasn’t actually a new high in real terms. The January 1980 peak of $850/oz still hasn’t been surpassed when adjusted for inflation.

According to the government’s own inflation calculator, $850 in 1980 dollars translates to $2,475 in 2020 dollars…and $2,708 in 2020 dollars.

These are low-end inflation adjustments based on a heavily massaged Consumer Price Index. In recent years the CPI has tended to understate real-world inflation, according to many independent economists. So gold could run significantly higher even than the CPI-adjusted figures before making a true new high in real terms.

Gold Price Per Gram

How many grams are in an ounce of gold?

One troy ounce of gold is equivalent to 31.1 grams. Although gold prices are most commonly quoted in ounces, gold bullion is also bought and sold by the gram. Grams can be a more convenient unit for pricing when trading gold in small quantities or using gold for everyday barter transactions.

Better bullion dealers sell gold bullion products by the gram. For example, Pamp Suisse and other well-regarded mints produce 1 gram gold bars. Also, the Royal Canadian Mint produces packs of 1 gram gold Maple Leaf coins.

What is the Dow to Gold Ratio?

The Dow:gold ratio measures how highly valued the stock market is compared to gold. The Dow:gold ratio tends to move lower during both deflationary depressions (as in the 1930s) and inflationary panics (as in the late 1970s). At the bottom of the Great Depression, Dow:gold reached a 1:1 ratio. That same 1:1 ratio was briefly reached again in January 1980 when both gold prices and the Dow Jones Industrials sported an 850 handle.

In 2020 and 2020, the Dow:gold multiple has ranged from 16 to 20. During the next financial crisis, that ratio is likely to collapse in favor of gold. Some gold bugs believe a return to 1:1 parity will happen again.

A 10,000 Dow and $10,000 gold, for example, may seem far fetched today. But during a true panic in markets, one or the other price extremes – or both, simultaneously – could be realized.

Ways to Purchase Gold

Gold products as an investment are typically purchased in the following three forms:

  • Gold Bullion Coins
  • Gold Bullion Bars
  • Gold Bullion Rounds

The weight of gold is measured by troy ounce. Gold can be purchased by the gram, in ounces, or even by the kilo in the form of a gold brick. Since sizes vary from an oz to kilos, direct physical possession of gold is not required. Often this gold is stored in a safe, with a dealer, or at the bank or another facility. Other options include gold certificates, exchange-traded products, gold bullion price derivatives, and gold accounts.

For example, contributing to a gold or precious metals IRA is another way to invest get and exposure to the gold price and the physical metal itself. The IRA custodian allows more diverse investments. The IRA holds physical bars or bullion as well as paper assets. Gold self-directed accounts can also include other types of retirement accounts. Precious metals that can be held in these IRA accounts include gold, silver, palladium, and platinum. It is required these metals held inside of an IRA are in the form approved by the IRS for this purpose.

Types of Gold Bullion?

The three main types of gold bullion are bars, rounds, and coins. Each type come in a variety of sizes. Bars may range from a single gram to 100 ounces each. Rounds and coins are commonly sold in 1 ounce and fractional sizes.

The main difference between a round and a coin is that the former is produced by a private mint while the latter is produced by a government mint. A government-minted gold coin typically has a legal tender face value attached to it (which is considerably less than its intrinsic metal value).

Specialty products such as jewelry and collector’s items are generally not considered to be bullion. Bullion investors should avoid collectible (numismatic) coins that carry high premiums over spot prices.

Is Gold Bullion Traceable by the Government

In almost all cases, no – dealers do not have to report the transaction to the IRS or other federal agencies.

There is one extremely rare exception. For a disclosure requirement to be triggered, BOTH of the following conditions have to be met:

  1. The transaction is (or related transactions are) larger than $10,000 in size.
  2. Payment is made using actual cash (i.e. Federal Reserve notes) or with two or more cash instruments (defined as money orders, cashier’s checks, or traveler’s checks) which total more than $10,000.

Personal checks, debits, bank wires, and credit card payments are NOT considered cash or cash instruments. Therefore, purchases using them do not trigger disclosure by a dealer regardless of the amount.

How to Invest in Gold

From beginners to educated investors, it is easy to invest in gold. Before signing a contract or purchasing any gold product, prices should be calculated and clearly quoted. Verify all costs and fees before you commit to buy anything. Ask questions and remember that time is of the essence. While you should never feel pressured, the price of gold rises changes every minute so expect to be asked to make a commitment to lock in your price.

Whether you have hundreds or thousands to spend, this savvy financial asset is accessible to everyone. Call Money Metals Exchange for a free expert consultation today. The process is discreet, secure, and beginner-friendly. Investing in gold is a cost-effective, simple way to create a safe-haven for your assets. Money Metal Exchange is with you every step of the way as you discover the mystery and wonder of owning gold. Contact us today to find out more about investing in gold and other precious metals!

Storing Physical Gold Safely

It’s good to take a two-pronged approach. First, store some of your gold at home in a well-concealed safe for immediate access in case of emergency. Store the remainder of your gold in a secure, insured bullion storage facility. Insist on segregated gold storage to avoid co-mingling your bullion with that held by other customers.

Safe-deposit boxes at banks are generally not suitable for bullion storage. Some banks have policies that explicitly prohibit gold bullion. Plus, your gold would be at risk in the event the bank goes under or gets raided by government agents. You don’t want your gold tied into the banking system, even indirectly.

Gold price predictions for 2020 and beyond

Gold has always held a special place in our hearts, but should it also have a place in our portfolios? We look at where gold prices are heading in 2020

Throughout history, gold has been seen as a valuable commodity. We’ve traded with it, worn it, used it and saved it. Its intrinsic value dates back over 6,000 years when early transactions were carried out with pieces of the precious metal. Gold artefacts have been found in the Varna Necropolis in Bulgaria and the Sakdrisi site in Georgia, that dates to the 3rd of 4th millennium BC, could be the world’s oldest gold mine.

India and gold

Today, 52 per cent of gold production is for jewellery, with India alone accounting for 25 per cent of the total physical demand worldwide. Gold in India is seen not just as an adornment but an investment, with most consumers believing it a safe asset that protects them against volatility and uncertainty.

When the demand for gold jewellery increases around the traditional festive and wedding seasons, the price of gold rallies. When inflation rises and the value of currency goes down, consumers prefer to hold on to money in the form of gold.

Weather-dependent demand for gold

India consumes 800-850 tonnes of gold each year, with 60 per cent bought by people in rural areas. If farmers make a lot of money from a successful year, they buy gold to create assets. Should the crops fail, they sell to generate capital. As the June-September monsoon delivers 70 per cent of the country’s annual rainfall and dictates whether or not crops succeed, the monsoon affects demand for gold. How climate change will affect this delicate balance is yet to be understood.

Electronics demand for gold

Gold is also an excellent thermal and electrical conductor; malleable and non-corroding, making it vital to the electronics industry, which accounts for about 9 per cent of global demand. Most electrical devices contain a small amount of gold, with each of the 1bn mobile phones produced globally each year containing around 50 cents (35 pence) worth (although this is rarely recovered and recycled).

Gold is also used in conducting plastics, catalysts and dentistry and when demand is high, the price goes up.

Gold as a safe haven?

Gold is still considered by many to be a safe haven, an investment that will retain or increase its value in turbulent times. Following the September 11 attacks and the 2008 financial crash, investors flocked to the precious metal as confidence in the US dollar and some assets classes became shaky.

Suddenly, gold bullion started attracting new players, such as hedge funds, that had previously considered the metal a relic. By 2020, prices had rocketed to $1,900 an ounce and demand for gold coins, such as South Africa’s Krugerrand, was so strong that dealers around the world ran out of stock. However, this wasn’t to last, with gold prices losing 30 per cent by 2020.

In 2020, many experts see gold as a good diversifier as the price tends to move in a different direction to other assets such as equities.

However, as gold was “de-monetised” in 1973, when the US government formally abandoned the Gold Standard, some believe that since then it can no longer really be considered a safe haven. Indeed, many now view it as a hedge against inflation as it is not affected by the CPI and an insurance policy against global volatility.

Gold’s performance in 2020

So far, 2020 has proved positive for gold which, despite ups and downs, rose by 10 per cent in the first half of the year. The spot price at which it can be bought and sold right now is currently $1,469 (£1,143) per ounce. This is down slightly from September’s six-year-high of $1,548 but the upward trend seems well supported.

What determines the spot gold price?

Spot gold prices are affected by the laws of supply and demand. If buyers are trying to buy gold, sellers may lift prices to make buyers bid higher. If plenty of sellers are available, buyers may bid lower, forcing the price down.

Gold Futures

Futures contracts provide a hedge against price changes. Companies that need to purchase gold in high volumes can take out a futures contract with a gold producer, settling the price payable for a set weight on a set date in the future that must be paid, irrespective of whether prices on the open market have risen or fallen.

The commodity spot price of gold is an average of the estimated future price of gold, based on traded futures contracts for the nearest month. The futures markets are the fastest to react to financial movements and can rapidly build them into the price of gold. By analysing the advanced investor commitment to gold, we can see how strong sentiment is, helping the various bodies that set the price ensure demand is maintained and keep gold trading.

What has affected the price of gold?

The gold price is affected by many global influences. Geo-political tensions between the US and Iran and the trade war between China and the US are just two factors that have affected the global economy recently. Banks in New Zealand, India and Thailand have cut interest rates to protect themselves.

The US, which has already had three interest rate cuts this year, could be in line for more, which would weaken the dollar. As gold is valued in this currency, the price of gold could rise.

Closer to home, Germany has narrowly avoided going into recession and Brexit is looming. If the UK and EU cannot agree a deal the pound could weaken, pushing up the price of gold. A ‘hard Brexit’ could also hit the pound if the British economy slows. Again this would cause gold to rise in price. In the unlikely event of Brexit being aborted, we would be likely to see business as usual and demand for gold linked again to the strength of the dollar – or indeed the pound could strengthen and the price of gold go down.

Gold price prediction

Gold is cyclical and plunged to a low of $250 per ounce in 2001. However, since then it seems to be rising. Some believe this upward cycle could last 30 years,and could have another 11 years to run.

Gold price future prediction 2020

As for the forecast for 2020, many analysts believe the trend will continue and predict a price of $1,500 per ounce by the end of 2020. Analysts at TD Securities reckon we could see $1,600, while analysts at Goldman Sachs have even predicted $1,650 or higher.

Canadian businessman and mining financier Frank Giustra strongly believes we should all hold gold as part of our portfolios. Not only does he see it as a form of insurance in the current tumultuous global climate, he also believes that as interest rates are being lowered in many countries, this could be the start of a gold run.

Gold prediction 2020

Giustra’s gold price prediction for 2020 remains firmly bullish, reckoning it could “blow through $1,900” and even higher. He also believes that investing in mid-sized gold companies means you will benefit from the rising price of gold as well as the growing business – although his role as chairman of Leagold Mining (LMC:TSX) a Latin American gold producer, may partially account for his enthusiasm.

“The magical metal was no match for American mettle”

Not everyone is such a believer. In his annual letter to investors this year, American business magnate Warren Buffet noted that the US national debt has been steadily increasing over the past 77 years. If investors, to “protect” themselves had chosen to buy gold, they could have ended up with an asset worth less than 1 per cent of a simple unmanaged investment in an American business.

Gold price forecast for next 5 years

Former Federal Reserve chairman Ben Bernanke once famously told Congress:“Nobody really understands gold prices, and I don’t pretend to really understand them either.”

Gold has been showing a rising tendency and the gold price forecast 2020 looks promising. Many believe it is still a safe haven. As for a five-year forecast, numerous analysts have used algorithms that seem to foresee a continuation in the trend, predicting gold could even reach $6,000 per ounce in 2024. But with today’s uncertain political situations and climate change’s unpredictable effect, can we really make predictions over such a time period?

One thing’s certain; with an estimated 54,000 tons yet to be mined and 3,100 tons produced each year, we need to look after this commodity because it won’t last forever.

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Economic History Resources – What was the price of gold then?

This page features a wealth of information on historical gold prices as well as gold price charts. If you are considering an investment in gold, you may want to take a look at the metal’s price history. The chart at the top of the page allows you to view historical gold prices going back over 40 years. You can view these gold prices in varying currencies as well, seeing how it has performed over a long period of time. Depending on the currencies being used, you may find a better long term value. For example, because gold is typically denominated in U.S. Dollars, if the dollar is weaker then someone buying gold in yen or euros may find gold to be relatively less expensive. On the other hand, a stronger dollar may make gold relatively more expensive in other currencies due to exchange rates.

You can also easily examine historical gold prices on a much smaller time horizon from 10 minutes to three days to 30 days to 60 days and up. The timeframe you decide to look at may depend on your investment objectives. If you are simply looking to buy and sell gold as a swing trader, you may focus on the hourly or six hour charts. If you are looking to invest in gold for the long-term, you may be better off using longer timeframes such as weekly, monthly or yearly.

Why Look at Historical Gold Prices?

Looking at historical gold prices may potentially provide information that may assist in buying or selling decisions. Looking at the big picture, gold trended higher for many years before making all-time highs in 2020 of nearly $2000 per ounce. Gold has since been moving lower, but could have possibly found a bottom in 2020. Although it remains to be seen, gold’s declines from the 2020 highs could simply prove to be a pullback within an even longer-term uptrend.

Examining historical gold prices can potentially be useful in trying to identify potential areas of price support to buy at. For example, if gold has pulled back to $1200 per ounce on numerous occasions but is met with heavy buying interest each time, then the $1200 area could be considered a level of support and could potentially be a good area to try to buy at.

In addition to viewing historical gold price charts in U.S. Dollars, you can also view historical gold prices in numerous alternative currencies such as British Pounds, Euros or Swiss Francs. You can even view a historical inflation-adjusted gold price chart using the 1980 CPI formula.

For easy reference, this page also contains a simple table that provides gold’s price change and percentage change using a single day, 30 day, six month, one year, five year and 16 year timeframes.

What has Driven Changes in the Gold Price?

Over the past several decades, the price of gold has been influenced by many different factors. Gold’s price history has seen some significant ups and downs, and dramatic changes in price may be fueled by such issues as central bank buying, inflation, geopolitics, monetary policy equity markets and more.

One of the biggest drivers of gold is currency values. Because gold is denominated in dollars, the greenback can have a significant impact on the price of gold. A weaker dollar makes gold relatively less expensive for foreign buyers, and thus may lift prices. On the other hand, a stronger dollar makes gold relatively more expensive for foreign buyers, thus possibly depressing prices. Fiat, or paper currencies, have a tendency to lose value over time. If this continues to be the case, gold could potentially continue in an uptrend as investors look to it for its perceived safety and its potential as a hedge against declining currency values. Gold has long been considered a reliable store of wealth and value, and that reputation is not likely to change any time soon.

Although past performance is not necessarily indicative of future results, gold’s price history can potentially provide clues as to where it could be headed. Looking at past price data, for example, may help with spotting uptrends or downtrends. Investors may also potentially spot tradable patterns within the price data that can potentially lead to solid buying or selling opportunities.

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