Value Gold Coins – Do You Have High Value Gold Coins?

Like anything else in the world, the price of gold is mostly determined by simple economics. Supply and demand drive the price of gold up and down. However, when compared to other commodities such as oil, there is an issue with hoarding gold which can have an effect on its value. Oil, for instance, is not horded but rather is an expendable good, used almost as soon as it is purchased. Because gold can and is horded frequently, it affects the price.

Additionally, most of the gold still in existence today is still available for purchase, meaning that it can come back into the market if certain economic conditions apply. Towards the end of 2006, for instance, a study was done wherein they determined that all the gold ever mined came to a total of just over 150k tons, which is not a lot if you think about it.

Interestingly enough, the massive amount of gold that is stored and not used for jewelry, when compared to the amount of gold that comes into the market yearly, it can be determined that the cost of gold is affected less by the amount produced, and more by the emotions of those doing the trading. Whew! That’s quite the run on sentence there…

The World Gold Council reports that the amount of gold mined yearly comes to about 2500 tons. From there, roughly 80% of that goes into jewelry or other goods, such as fillings and other dental procedures. Roughly another 500 goes into investments and gold funds which are traded on the open market.

What does this mean? Basically, the amount of gold mined each year is 1000 tons short of the yearly world demand, mainly coming from central banks and other investment firms. In translation, there is a HUGE demand for gold at the current time which isn’t being met by the supply from miners.

Let’s talk about central banks for a second. They also have an influential role in affecting the price of gold. For instance, at the end of 2004, various banks and organizations were responsible for nearly 20 percent of all the non-mined gold in the world, as well as the official gold reserves. There is something in existence called the Washington Agreement on Gold, or WAG, which states that its members are only allowed to sell less than 400 tons of gold per year. The members of this organization are: USA, Japan, Australia, and Europe.

To fill this hole, some European central banks have been selling massive amounts of gold during this time. Central banks are not known for letting people know of their gold purchase ahead of time, however Russia has made it known that they would like to increase their gold stores towards the beginning of 2006.

Speaking of 2006, it was during that year that China made it known that they also wanted to increase their gold reserves. Because they currently hold so little gold as collateral against their currency, they wanted to diversify their portfolio, so to speak. There are investors out there who think this is a sign that China is going to join the rest of the world in putting more weight behind their currency in the form of value gold coins.

India, for example, just bought more than 200 tons of gold, which in turn affected the price by making it rise.

Another reason that the prices of gold could be affected is because of bank failures. Back in the day when gold was interchangeable with currency, you could use both to purchase goods and services. That being said, most people still preferred carrying paper money to gold coins. During the Great Depression, people would go on something called a “bank run,” which is basically where they go exchange their currency for gold coins to protect their assets.

Also, if the interest rates on bonds and other investments falls below an acceptable level, the price of gold has known to have been affected. This happened in the 1970s.

Finally, in times of war or other national crisis, people have been known to invest in gold. The idea behind this is that people want to put their money into something that is going to keep its value. If their country is invaded, their personal belongings stolen and their currency deemed worthless, people are going to want something that is going to retain value on an international level.