Hey there! I've always been a silver guy, but I have some questions about gold and gold pricing, in general: - How much of today's gold price is due to speculation and investment pools? It seems to me that as the price goes up the only justification is that "Gold's Hot!" Is gold rising in price for any reasons other than speculation? - Is it true that the refinement process adds a large premium to the cost per ounce for gold? I heard somewhere that at least $500.00 per ounce is solely for the refinement costs; is this bogus? It seems like it would be, but I don't know what to believe. - My last question regards all precious metals, and I guess all commodities, in general. Say the U.S. dollar loses strength over the period of a month. This decline in the purchasing power would effectively raise the price of gold/silver/oil, right? Or is it the other way around; an increased demand for commodities effectively weakens the dollar? Or do the two things effect one another simultaneously? I haven't taken an economics class before so I'm a little confused about which factors effect other factors. Thanks in advance for responses
Here is a different perspective for you. Gold can be considered a commodity this is true. However the difference between it, and all other physical commodities is the central banks, including the one that printed the $, hold this commodity as one of the assets used to back the fiat currencies they print.
1. Everything above the cost of production plus a normal profit margin is speculation and investment premium. That isn't a bad thing. 2. Refining adds nothing to the cost of gold. Comex eligible gold bars are already highly refined and the cost is just part of the spot price. 3. If the dollar goes down, commodity prices will generally rise. But if the dollar goes up, commodity prices may also rise for different reasons. Currency is only one of many factors.
The dollar has been steady on a downward curve for quit a while. It made our high end products affordable or good for large buyers overseas. PMs look like bargains as you look back a year. Trade imbalance leads one to believe we are not making enough hard products for our own markets. With our technology the production rate per hour is very high on what we make. Once you leave an Industry it takes years to get back in ! The cost of building to the latest standard is overwhelming in time and money.
