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Learn More Concerning The Gold Silver Prices
One explanation for the increase in today's gold silver prices is that it is adjusting for the past twenty six years of monetary inflation. The consequences of the adjustment in the gold silver prices will be a reduction in American's net worth and an increase in their food and energy costs.
Within a gold standard, or in a market, people can exchange their paper currency for gold. The gold standard gold silver price equals the supply of currency in circulation divided by the total supply of a country's gold bullion. The graph below shows the relationship between the gold standard gold price (black line) and the actual gold price (red line) since 1950.
Effects on gold price: The day price of gold is based upon supply and demand. Since most of the gold ever mined still exists and is potentially able to come on to the market for the correct price, unlike all other commodities, the hoarding and disposal performs a much bigger role in influencing the price. Towards the end of 2006, it was estimated that all the gold ever mined totaled 158,000 tons. Given the huge quantity of stored gold, unlike the annual production, the cost of gold is principally affected by changes in sentiment, instead of adjustments in annual production. In times of national crisis, people fear that their assets may be seized and that the currency may become useless. They see gold silver as a strong asset, which will continually buy food or transportation. Thus in times of great turmoil, specifically when war is feared, the demand for gold rises. When dollars were ully convertible into gold, both were regarded as money. Nevertheless, most people preferred to carry around paper banknotes rather than the slightly heavier and less divisible gold coins. If people feared their bank would fall short, a bank run might have been the result. This is what took place in the USA during the Great Depression of the 1930s, leading President Roosevelt to impose a national emergency and to outlaw the ownership of gold by US citizens.
In 1950, the gold value was $34.72 and the gold standard gold silver price was $38.77. In 1971 gold price was allowed to float against the US dollar, it generally increased. The reason for the increase was the gold price was adjusting for the three decades of monetary inflation made by the Federal Reserve Bank.
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When the dollar weakens for example, the value of gold silver does gain. The demand for gold and silver has been increasing and this is why you notice increased trading as people buy gold silver in NY or California
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