Gold has been in the headlines in recent years mostly due to its falling price. Bullion is trading at its lowest level since 2010. With the US dollar strengthening, and the Fed potentially raising interest rates this year, gold seems poised to remain low. However, it’s not just gold’s price that’s in the news.
Gold pricing gets up to speed with technology.
For almost a century, gold has been valued by a group of bankers and bullion dealers, first in person, and later, via conference call. Twice each day, the price was decided by determining buying and selling interest in gold. A price would be quoted, and if there were more buyers than sellers, the price would be raised and vice versa. The final price would be decided when the difference between buying and selling requests was less than 50 gold bars.
On Friday, March 20, the pricing of gold went electronic. The core process remains the same, twice daily through selling and buying interest. The difference is that the electronic method is transparent and can be audited, making abuses of the process more difficult.
Gold demand in Asia set to double by 2030.
As wealth in Asia increases, analysts expect that higher demand for jewelry and investment could drive prices from $1,400 to 3,230. In addition, gold has cultural significance across the area and the increase in disposable income, as well as those who desire a safe investment, will help push prices up. Gold was harder to obtain due to communist policies in China and an import ban in India. From a financial perspective, central banks in the region “will purchase more gold to provide confidence in newly floated currencies.”
Could gold have already reached bottom?
Some analysts argue that gold has gone as low as it is going to go, and the potential for the Fed raising rates in the US as well as the increasing demand in Asia will mean that prices pick up. According to the article in Fortune, “gold has nearly fallen 50% from its 2011 peak, a critical level for believers in technical analysis, when stocks and commodities often rebound.” The introduction of the Apple Watch in solid gold has spurred discussion that demand for these smart watches, particularly in China, will support price growth.
Far from being a static asset class, gold has seen some interesting developments in recent years and its potential boom in Asia will be something to watch.