Image via Wikipedia
MCX Gold provides a way for commodity futures contracts to be traded on the most well-established precious metal known to mankind. People have stored, hoarded, and traded gold for literally thousands of years. It is recognized around the globe as a currency, store of value, and hedge against inflation where fiat currencies and dishonest money systems are used. The futures contracts acknowledge gold as a commodity and allow it to be bought and sold for investment purposes. This offers a great alternative to participating in a general bullion fund or buying bullion direct from a supplier.
MCX Gold – Gold Background
Gold has the advantageous benefit of being heralded as both a commodity and a financial asset in the form of a currency. Throughout time, though fiat currencies have come and gone and risen and fallen in value, gold has remained stable in value and impervious to the financial fraud that is perpetrated from one government to the next. Regardless of how it is used, it is nearly always recycled as jewelry may become bullion and so on.
The value of gold is in part stabilized by the many forms of gold that can be recycled to create additional supply when a fiat currency slips in value and weak hands release the gold for additional units of paper money. MCX Gold prices “rise” relative to paper money, particularly in inflationary times, and thus serves as a safe haven when currency devaluation is under way.
MCX Gold In Light Of Steady Supply, Rising Demand
Gold has some interesting supply and demand characteristics. Statistics show that there are about twenty-five hundred tons of gold mined each year, on average. Since gold is rarely consumed, or discarded, scrap gold supplies over 1,000 tons annually. Official sector sales account for just less than 400 tons a year, making up any shortfalls.
It’s thought that South Africa may be responsible for half of all gold that’s ever been mined. That country has been a major producer since the late 1800s. It was the top producer worldwide form 1905 until 2007 when mine output dropped from 1980’s averages around 1,000 tons annually to just 272 tons.
The top five countries driving demand for gold are India, China, the United States, Turkey, and Saudi Arabia/UAE. Combined, these nations require over sixty percent of all gold requirements. The basis for the gold demand may differ. For instance, India has largely used gold for jewelry. However, investment demand has risen with the rising price. Nevertheless, unique economic and cultural factors influence demand. When viewed as a whole, about 2/3 of annual gold buying pressure comes from jewelry purposes. The balance is investment and minor industrial application.
Of all the gold that’s been mined, just over half of this above-ground stock is in the form of jewelry. Roughly equal amounts are thought to be government stockpiles and investment gold, 18% and 17% respectively. About 12% is for industrial and manufacturing applications. Curiously, about 2% is unaccounted for. Investment demand is strong, despite the fact that MCX Gold prices have been rising for a decade.
MCX Gold And India’s Role
India is a major player in gold. India consumes more gold than any other nation on Earth, though China has really ramped up its buying recently. India actually buys about a quarter of all available gold each year, totaling about 750 tons. With stockpiles over 15,000 tons, India has nearly 10% of total worldwide stockpiles of about 160,000 tons. The Central Bank holds just 2% of such holdings worldwide, but that number is sure to keep growing. Jewelry, cultural, and religious factors drive the demand for gold. More recently, it is being used as a way to store wealth and as an investment as MCX Gold prices rise. Although India produces nearly nothing, it’s able to recycle nearly a quarter of all gold each year, probably in large part due to the notable amounts of gold used for jewelry. As a minor producers at best, India imports drastically more than it exports. Consistent with India’s massive importing of gold, it’s infrastructure for refining and assaying is not remarkable.
MCX Gold Correlation With Other Exchanges
MCX Gold prices in India track closely with gold prices on the international market. The price varies, however, as native currencies fluctuate against one another. Prices for gold can be impacted by various factors, such as interest rates and broad economic strength. Faith in the “system” causes people to drift from the certainty of gold. Supply is relatively constrained, unable to rise as quickly as the fast-paced investor demand. This can bid up the price, as the native fiat currency is decreasing in value actually or perceptively. To choke back rising prices, central banks are known to sell reserve gold into the open market to perpetuate the appearance that all is well with the paper money. This can temporarily suppress MCX Gold prices, buy only short term.
