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Gold Commodity Market


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A commodity is a product for which there is a demand. That demand is determined by market conditions. One other component of a commodity is that wherever it comes from it is the same. Gold is gold, whether from South Africa or Russia (in its original form). Therefore, we can say gold is a commodity whose price is determined by the market. Institutions like government banks make the bulk of the purchases, which leaves room for them to manipulate the market. Gold as a commodity at this time is not being found in greater amounts than before, and it is not an easy process to mine it. Therefore, it is a perfect hedge against inflation.

As of now gold commodity prices seem to be hovering around $950 an ounce with differing opinions about how high it will go. Few are saying it will go lower, most say higher. A minority is talking about $2500 an ounce in the very near future. Economic conditions would have to considerably worsen for this to happen, but it is a good possibility.

A gold commodity takes a variety of forms from coins to bars to bullion, to an investment in a single gold mining company to funds that invest in a basket of gold producing companies. Gold will never be worth nothing as a nation's currency might, because nations can print all the money they wish. Gold is sometimes feared by governments and in 1933 President Roosevelt by Executive Order No. 6102 confiscated much of the personal gold of the citizens. There are those who say it will happen again. I do not believe this to be true, because in the 1930's people actually carried around gold coins as currency. Relatively few people have gold today, except for their jewelry, up to this point in time. Certainly not enough for the government to fear.

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