Investiagte the gold market and analyse the economic reasons for price fluctustions in that market

GOLD MARKET

Running Head : Gold Market

GOLD MARKET

In APA style

2008

Gold Market

Introduction

Back in the early years of economy , governments are printing money to meet their transactional needs with little restrictions regarding broader economic factors . As a result , inflation grew wild and it was almost impossible to perform dependable international trade because of currency problems . The gold standard was one of the first modern systems that were established to create standards of currency value that would allow safer and more dependable international business activities

. The basic principle of the system was laid on the commitment that all participating countries establish fix prices of their domestic currencies in terms of a specified amount of gold (Bordo , 1991

The gold standard was first considered a bullet proof system . By obligating national currencies to be weighted by the amount of gold reserves within that country , governments can no longer print cash whenever they require . Theoretically speaking , the system allowed a certain balance of economical distribution between countries . If an economy gains certain competitive advantages in international trade , the amount of gold flowing to that particular country will increase . This will generate enhanced ability to print more money to increase economic growth within that particular economy . In a sense , this will also increase import because the economy has more ability to purchase goods from other countries

In theory , the application of the gold standard will provide a system of control between countries in the global sphere and generate wider distribution of wealth . England adopted the gold standard in 1717 and the United States converted to gold standard in 1834 . Afterwards , there were many other countries joined the gold standard . Overall , the gold standard reached its peak of popularity during 1880 to 1914 (Bordo 1986

Concerning the gold commodity , this will discuss about the gold market , discussion over the gold standard and its functions in the world 's major foreign exchange markets . In addition , we will also discuss the function of the world 's major foreign currency exchange markets . Prior to the discussion , this will elaborate gold and its role in economy , how supply and demand influence gold price , and current factors that affect the price of gold nowadays

Gold and its Roles

Technically , gold is a metal . Like other metals , it has a certain color weight , durability and other characteristics that people refer to as the sources of its value . Gold however , is not a commodity like other metals . While other metals are valued based on its physical usefulness or availability , gold is valued based on different considerations Economists stated that if gold is to be valued as a commodity like other metals , than its current price is many times higher than it should be Gold has a unique role compare to the general commodity . Although it also has valuable functions for manufacturing industries (because of its unique physical nature , Gold mainly functions as a representation of value itself

In 1930 's when the world 's economies were running...