In India, gold is traded on the Multi Commodity Exchange (MCX), where its rate changes every second during market hours. The closing price of the previous day is set as the purchase price of gold in the local markets of the day. As a result, gold is often considered a hedge against inflation. Inflation occurs when prices rise and, in the same way, prices rise as the value of the dollar falls.
As inflation increases, so does the price of gold. The United States maintains stocks of gold at the Fort Knox ingot deposit in gold bricks weighing 27.5 pounds per unit. As central banks diversify their monetary reserves from the paper currencies they have accumulated to becoming gold, the price of gold tends to rise. From the 1870s until the First World War, the gold standard was a global structure in which the money supply of almost all countries was fixed at a fixed price of gold or was linked to another country participating in the system.
These changes lacked staying power and Bretton Woods was dissolved in 1971, welcoming an era in which gold was freely traded. Some investors may choose to maintain some exposure to gold in their portfolio to diversify, as a protection against the fall in stocks and bonds. Therefore, gold prices may be affected by the basic theory of supply and demand; as demand for consumer goods such as jewelry and electronics increases, the cost of gold may increase. Gold prices can be extremely volatile, and that means that gold is not a fully stable investment.
Another 7.5% of demand is attributed to the technology and industrial uses of gold, where it is used in the manufacture of medical devices such as stents and precision electronics, such as GPS units. Considering the diversification and general stability of the price of gold, opting for gold is an excellent purchase option. The outlook for the price of gold will probably depend on how geopolitical tensions develop and how monetary tightening affects the world economy, among other factors. Nowadays, gold is sought, not only for investment purposes and to make jewelry, but it is also used in the manufacture of certain electronic and medical devices.
Today, gold remains a medium of monetary exchange between countries and is considered a “durable store of value” and a hedge against inflation, according to Investopedia. The World Gold Council, the market development organization for the gold industry, recently opined that the commodity will face two key obstacles. Gold became an international medium of exchange in the Middle East and eventually became a popular currency known as El Shekel.