MIEC Group 4 TB08 by Xue Ning

Gold is expected to drop

gohxuening — 2015-11-28 12:04:54 UTC

After falling steadily simce hitting a peak in 2011, analysts expect gold prices to push lower in near term, the end of an era for the precious metal

gohxuening — 2015-11-28 12:07:29 UTC

Gold falls to lowest since 2010 as rising dollar curbs demand

gohxuening — 2015-11-28 12:10:32 UTC

Demand for gold in this case is dropping due to quantity demanded . As with a stronger dollar, people are unable to buy more with every dollar they use hence quantity demanded decreases.

In addition, it is quite obvious that it is quantity demanded as the demand for silver, bronze are also decreasing. This is hence justifiable since prices of related goods also decrease hence demand cannot play a factor in this case.

Gold is expected to drop

gohxuening — 2015-11-30 03:37:58 UTC

Weak demand for gold in India and China had further crippled the price of gold.

An increase in the cost of production of Gold results its current price to be at US$1,200 per ounce and US$800 -US$900 at bigger and better mines.

A weak demand and high price.

Gold price falls due to stronger dollar and rates speculation

francisgjh98 — 2015-11-30 08:07:35 UTC

Gold prices fell in response to the dollar's bounce after healthy US economic data raised expectations of an interest rate rise next month. Prices hovered just above their lowest level in nearly six years, as spot gold fell 0.4 per cent to $1,070.46 an ounce, perilously close to the near-six-year low of $1,064.95 it hit last week. Gold has been put under pressure by increasing speculation that the Federal Reserve will raise US rates next month for the first time in nearly a decade. Such a move would increase the cost of holding non-yielding bullion, having a knock-on effect on prices. Thus people want to keep their US dollars instead of using them to buy gold as the US dollar becomes stronger.

Comments from Tutor

2015-12-07 23:31:02 UTC

You have good articles on Gold but you need to explain the factors in demand and supply affected the changes in gold prices.

You need to illustrate with diagrams to show the changes in demand and supply and how it affected prices and quantity

Beside demand and supply you also need to explore other concepts like elasticity, production and cost and definitely market structure.

Gold is expected to drop further analysis

gohxuening — 2015-12-26 17:17:39 UTC

Gold prices have steadily fallen after hitting the peak of US$1,900 (S$2,615) an ounce in 2011. It is now being traded at around S$1,080 an ounce and one analysts said that he expects the price to push of a lower value in the near term. This is due to high opportunity costs of holding gold which carries zero interest. High opportunity costs would then result in the increase of the price while the quantity demanded decreases as this is a movement along the demand curve due to a change in price determinant. Also, as analysts said that other than a change in price determinant, there was also weak demand in India and China, the world’s biggest gold markets. For India, it is external environmental factors like an expected monsoon to hit rural incomes which further cripples demand for gold. For China, it is due to the government’s crackdown on corruption which leads to a fall in gold-giving. On the demand and supply curve, there will be a drop in demand, a movement up along the demand line while prices increase. This decrease in demand results in a lower quantity demand than quantity supply. This unbalance results in a shortage as buyers now buy less and sellers try to sell more and it will continue on until market equilibrium is attained and shortage will thus be eliminated then. But for now, it is still adjusting. As gold is a luxury, it is also more price elastic - quantity demanded is lower.

Analysis

francisgjh98 — 2016-01-08 19:13:10 UTC

gold prices fell due to the expectation of customers about their disposable income - speculation that their disposable income would decrease. this is due to the speculation of the increase in interest rates which will decrease disposable income. thus demand for gold will decrease, causing a drop in its price as people would want to save up for the boost of the dollar. This expectation of customers about their disposable income is a non-price determinant of demand of gold, thus it would affect the demand of gold directly. this is because gold is a normal good, thus when income decreases, demand decreases. also, gold is a luxury item, thus demand for gold is income elastic. thus the percentage decrease in income will cause an even greater percentage decrease in demand for it. thus there would be a great decrease in the price of gold due to the great decrease of demand for it. gold is a luxury item because it is extremely expensive. thus people usually only buys it when they have a huge amount of disposable income.

gold is purchased mostly for investment purposes. thus buyers would want to resell it. this means that the buyers would expect the price of gold to increase after they buy the gold so that they can resell it to earn profit. but the price of the gold is decreasing currently due to the expectation that the peoples' income would be decreasing. thus there would be less buyers due to this reason too as gold would not be a good item for investment (as it is a luxury normal good), which will further decrease the demand of gold due to the decrease in buyers of gold in the market, which will further decrease gold's price.

Gold has always been a safe haven as this precious limited metal is highly sought after, making its price hardly falls. but the recent constant drop in its price might make gold buyers lose confidence in it, which might affect its demand and value. As gold is extremely scarce, its supply is relatively low. thus gold prices are relatively high.

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