Metal Commodities: Fundamentals of the Demand for Gold
The increased demand for gold is linked to a number of reasons. To profit in commodities markets from this increased demand, you need to be familiar with the fundamentals of the gold market.
First, you need to know what gold is used for. You may not be surprised to hear that jewelry accounts for a large portion of gold demand. However, did you know that dentistry also represents a significant portion of the gold market? Take a look at some of the uses of gold:
Dentistry: Because gold resists corrosion, it has wide application in dentistry. It’s alloyed with other metals, such as silver, copper, and platinum, to create dental fixtures.
Electronics: Because of its ability to efficiently conduct electricity, gold is a popular metal in electronics. It’s used as a semiconductor in circuit boards and integrated boards in everything from cellphones and TVs to missiles.
Jewelry: Since man first discovered it thousands of years ago, gold has been used as an ornament and in jewelry. The ancient Egyptian King Tutankhamen was so enamored with gold that he was buried in a gold coffin. Today jewelry is the most important consumer use of gold in the world, accounting for more than 70 percent of total consumption.
Monetary: Many central banks hold reserves of gold. In addition, gold is one of the only commodities that’s held in its physical form for investment purposes by the investing public. Another monetary use of gold, aside from central bank reserves and investor portfolios, is the use of gold in coinage. In countries such as Canada and South Africa, some gold coins are actually legal tender.
Many countries and banks hold reserve assets of gold. Here are the top ten gold-holding countries, as of 2010.
|International Monetary Fund||2,846|
Source: World Gold Council