The Current Market is an Aberration Historically

What is the True Value of Gold Today?

Believe it or not, gold has different values, depending on what state it is in and how much work has to go into changing it to a commodity form that can be easily traded between parties. The raw form of gold, straight out of the ground and freshly mined, is the most basic version, but even that comes with complications.

Gold is often found within other rock. In this raw form, the precious metal actually has no commercial worth. Granted, it’s not given away even in this state, but the return on rock-held gold is extremely low, in the neighbourhood of $30-100/ounce or thereabout. That’s because it needs to be freed, worked, refined, and prepared.

When the gold is actually free and clear of rock but not yet refined, the price rises but more work needs to be done. After the chemical and heating refine has taken place, the gold arrives in the state that become familiar, a high level of purity and quality that depends on what metals it needs to be mixed with for strength, depending on use. We commonly refer to this quality as the karat value of gold. 12 karat gold is very strong, mixed with other metals for strength, but its value is in the lower range. 24 karat gold is generally the highest level of purity, provides the highest value, but also has the weakest strength. Such high purity gold is extremely soft and can even be bent by hand if formed in a thin form like a ring or rod.

Jewellery, bullion coins, gold bars and similar are all refined forms of gold with different karat content. The closer they are to 99.9% purity the higher the value and potential return for investment if the gold spot price rises. The variations of how to buy gold are easy to learn as well, listed out on MyGold online. And you can learn how to be gold smart in person at our store located right in the heart of Auckland’s business district. We’re easy to find, just 200 meters from Sky Casino and the Auckland Sky Tower.

Understanding How to Estimate Gold Value Now and Forward

Gold has frequently been described as being worth whatever people are willing to pay for it, and historically that’s been quite a bit. Gold itself doesn’t produce anything, it doesn’t generate more goods or services automatically, and the metal isn’t consumable per se like petroleum for example. However, gold continues to trade extensively around the world with a universally recognized value. So how is that worth determined upfront and for the near future?

One factor of value estimation depends on which country you are in. For the U.S., a given method very well could be a comparative one that by ratio balances the number of U.S. dollars backed by gold held by the U.S. In June 2013 that ratio produced a value of $1,664/ounce. Close to today, in February 2019, the value was $1,329/ounce. The change in this model depends significantly on whether the U.S. government starts printing money, diluting value per dollar, or retracting and increasing the related value.

Another method involves using gross domestic production. However, this doesn’t work with one country because gold moves around a lot today. So, it needs to be a global GDP estimate. If one follows the assumption that the U.S. is 25 percent of the world market, then we just take the U.S. GDP and multiply it by four. That gives us a global GDP estimate. Then, we simply take the GDP figure and divide it by the number of ounces of gold consumed annually, about 8 million. Again, the answer can be shocking compared to the current spot price.

Now, you probably won’t see a 400 percent increase in value right after you buy your gold today or tomorrow. However, there is heavy potential for gold to rise after 2020, and significantly for gold smart folks. We can help at MyGold. See us online or at our store site in the centre of Auckland’s business district. We’re easy to find, just look for the Auckland Sky Tower and Sky Casino; we’re just 200 meters from both. See you then!

Gold Refiners in NZ - MyGold

Where Will Gold Go Tomorrow?

All of the Internet right now are plenty of forecasts and prognostication of where the value of gold will go too, especially with the current COVID-19 virus pandemic occurring. Put them all together, side by side, and the range of possibilities range from a low of $1,600/ounce to a skyrocketing insane estimate of well over $22,000/ounce. Now, is it really likely that gold is going to hit such as stratospheric price as the latter? Probably not.

However, there is a very good probability that gold will rise significantly over its current range in the $1,500s. First, the public investment markets are being pounded hard as economies across the world are being shaken due to the virus impact. That in turn drives speculation and investment out of that arena and in liquid form seeking a new home to retain value and protect near-future growth. Second, global governments are likely to bolster the economy with new stimulus packages similar to what the U.S. just passed for its own domestic markets. Germany came up with a similar economic response as well in March 2020.  All of these actions signal the need for a hedge, which gold has historically provided. So, long story short, higher demand with a limited supply means a higher spot price for gold.

If you’re thinking like a number of other gold smart investors right now and thinking 2020 may very well be the right year to get started with gold or increase your position, MyGold can help. And if you want to discuss possibilities in person, we’re located right in the middle of Auckland’s business district downtown. Our venue is just 200 meters from the Auckland Sky Tower and Sky Casino, being very easy to find.