When looking to buy or sell gold, it’s important to know what is happening in the market involving the commodity. In the last few weeks gold prices have skyrocketed because of the volatility of the market. It’s a good time to sell gold, whether you’re in Oklahoma City or Sheboygan, Wisconsin.
China’s gold shopping spree
The Chinese are on a massive gold shopping spree, consuming about 40 percent of all the gold mined every year, according to CNN.
Gold imports to China have surged over 700 percent since 2010, according to the latest data from Hong Kong, which shows an increase of importing 100 tons of gold in 2010 to almost 1,000 tons last year.
In addition to all the imports, China is also the world’s largest gold miner, according to the World Gold Council. So it’s both buying and unearthing a lot of gold each year.
Still, China lags the U.S. in gold reserves. The U.S. has by far the largest government reserve of gold in the world with over 8,000 tons.
U.S. stock market for gold and mining
With the price of gold up about 4.3 percent with no signs of stopping soon, gold mining stocks have spiked as well. With all the attention gold is getting right now, there are a couple things investors and sellers should know.
Uncertainty influences gold prices
The most important factor that influences gold prices is the level of confidence or uncertainty in the market. The stock market being off to a historically bad start, European banks hitting multi-year lows and the dollar yielding low have all weakened investor confidence and turning their attention towards commodities, especially gold.
The fact that gold is an actual physical thing that we can see and hold on to gives it a certain level of value protection. Gold is more certain than paper money, which is why investors look to it during times of uncertainty.
Typically, a lower dollar means that holders of other currencies can buy gold at cheaper costs. Also, lower yields mean less incentive for investors to buy bonds, pushing them towards gold instead.
Mining stocks are affected
In a rather obvious correlation, mining stocks move with the price of gold. So gold’s current increase allows gold miners to sell their raw material at a higher price, ultimately leading to increased revenue and higher profits.
With gold mining being an extremely volatile business, mining stocks often outperform gold when it is gaining. Today, for instance, gold is up about 4.3 percent, but the mining ETFs are up about 7 percent.