Gold Ounce Price Calculator & Precious Metal Charts

Studies show that gold has positive price elasticity, meaning its value increases along with demand. As with any asset with positive price elasticity, the more investors turn to gold, the greater the price is driven upward. What’s unique for gold is that the gold price may perform well under both good and bad economic conditions: It maintains value when the economy is healthy and increases in value when the economy is in trouble..

But investors will be investors, and historically in times of financial uncertainty, investors have flocked to gold. When the Great Recession hit, for instance, gold prices increased many times over. As the stock market bottomed out, gold was valued at $700 an ounce, and then for over 2.5 years, it kept rising even as the economy started to recover. The price of gold climbed to $1,825 in 2011 with the cheapest physical gold products at $1,950.

Gold is both a monetary instrument and a global commodity, much like oil or coffee. However, unlike those commodities, gold is not consumed: Almost all of the gold ever mined still exists, and more gold is being mined every day. At first glance, this might make you think that, over time, the price of gold would decrease due to the continuous supply, but looking back through history we clearly see that isn’t the case. How come?

Aside from the fact that the number of people wanting to buy gold is increasing at an even faster rate than the supply of gold, due to the increase in population, jewelry and investment demand offer additional foundations to the potential rise in the gold ounce price.

For investors, gold is typically held for a very long time after purchase. It’s highly unusual to invest in gold and then quickly sell it. The class of gold day-traders is very small. The same goes for gold jewelry (people are more likely to put it in a drawer or pass it down to a family member than cashing it in for a new TV. This means that new demand for gold has to be satisfied to a large extent from newly mined gold, and there just isn’t enough to go around when demand hits.

According to central banks’ regulations, gold is money, and it’s being recognized as money in reserve that cannot be printed and is not dependent on a foreign power. Therefore, when central banks hold gold in their balance sheets, they are not holding the gold as “commodities.”

Central banks are a major factor when gold prices are decreasing. During times when foreign exchange reserves are large and the economy is buzzing along, which means that growth for gold is low, a central bank will sometimes decide to exchange a portion of the gold it holds for a higher-growth asset. At the end of the day, central banks are businesses that are expected to make a profit.

The problem they face is that this is exactly when gold demand is not at its peak. Central banks are, not surprisingly, aware of this fact, so they take careful steps to manage their gold sales in a manner to maximize their portfolios or the markets. In fact, in an agreement between leading central banks called The Washington Agreement, the central banks agreed that no central bank will sell more than 400 metric tons of gold in a year. Signed on September 26, 1999, by 13 nations, this agreement is highly respected between the parties involved, and it was strengthened in 2004 and extended in 2009. However, the agreement was not renewed in 2019, as central banks are shifting away from selling gold to buying it.