Guest Articles >> Crystals & Jewelry

The Current Economics of Gold and Silver

By Andy M

In the past year the price of gold has increased dramatically, being brought into the public perception by the adverts and under-designed and fitted shops claiming cash for gold. With the gold market firmly in the publics eye, we take a moment to understand if the demand for silver has increased and what is happening to the price of this precious metal.

Known traditionally as the ‘poor mans gold’ the increasing price of silver has been under publicised, mainly due to the fact that gold has increased from $300 per ounce in January 2000 to $1350 in January 2011, that is an increase of 350%. We would assume that the price of silver would have stayed fairly consistent for this time. But the fact is that the price of silver has increase by 500% in the same period clearly outlines the problems in today’s highly inflated and slightly surreal market.

The rules of supply and demand indicate that as the price of one good increase, in this case gold, the demand for silver will increase as can be backed up by the supply and demand curve that is taught in many economics lessons as the fundamental cause of shift in price.

This shift in prices and demand is affecting the market for many of the products available as the supply of gold is decreased, there will eventually be more demand for it and everything should once again level out. But then again, gold is officially losing its purity with all the re-melting so the decrease in price next time could be a more sufficient one, with the gold that hasn’t been chopped in holding its value. That’s assuming the gold reserves will make its way out of the governmental reserves.

The obvious reason for the increase in price of gold is the weakening of the dollar which has found many of the Arabic and Asian countries finding a new source of investment, this has meant buying many of the gold reserves around the world. This is the rationale behind the adverts that have been coming on TV acting as a middleman selling the gold to the Governments in Asia and the Middle East.

We will hope for everyone’s sake that the companies that have been buying in all the gold act responsibly and don’t create a mess with all the precious materials that have been sent in. We would hope the companies and Governments with these gold reserves keep the purity and develop a sustainable way to bring these huge stock resources of gold back into the market.

About the Author

Andy M is keen on the business and economics of many different industries and currently works for a Silver Jewellery company. Follow him on Twitter @andym23

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