Do you love gold jewellery? Have you ever wondered how the price of your wedding band or your Rolex watch is calculated? Who comes up with these values and how do they come up with prices? Gold is mined, then purified and refined to 99.99% fineness. This is what is known as investment-grade gold. This is the gold that is bought by manufacturers and jewelers to make gold jewellery. The first consideration when it comes to gold is the price o0f the precious metal used to make the jewellery piece. A jeweller will factor into the price, the design and the cost of construction for a particular piece. With luxury jewellery, the cost of diamonds and other gems also play an important role especially if the gems are the rare kind.
What exactly are precious metals?
Precious metals are the kind of metals that are hard to find and are available only in certain places. Gold belongs to the class of precious metals because of its rarity. It can only be found in a handful of countries across the globe.
Precious metals include the likes of Silver, Platinum and of course gold. Because of their rarity, beauty, properties and their importance in industrial manufacturing these metals are used to make luxury jewellery. The price of precious metals and gems fluctuates all the time but what exactly causes these fluctuations?
Supply and demand
Precious metals like gold are naturally occurring metals, they cannot be produced. The amount of gold in the world is finite, which means that those in the industry are always aware of how difficult it could be for an order of precious metals and stones to be filled. The amount of gold that has been mined through the years is said to equal a cube with sides that are 67 feet.
The main suppliers of gold are mines. Over the years the demand for gold has grown but mining output has not grown. Instead, mining companies are shutting down because there isn’t enough ore to mine or maybe because they would have to drill deeper to get more gold. This is expensive and dangerous. To supplement the gold supply, gold buyers buy used gold products like jewellery, gold coins, gold bars, even gold teeth to sell to refineries who then purify the gold to a 99.99% fineness.
New technological innovations can affect the price of precious metals and precious gemstones. Take Gold for example. Not only is it used to make beautiful jewellery but it is also used in medical applications, space explorations, and various industrial applications. When an innovation involving gold takes off, that affects the demand for the precious metal. This pushes the price up for jewellery manufacturers who then pass that price increase on to their customers.
Things become popular and then as time goes by their popularity wanes and something new comes along. Some things can go out of fashion whilst other things never will, like a simple diamond engagement ring. In the jewellery industry, some metals go out of fashion whilst others continue to be fashionable. For instance, there was a time when platinum jewellery was more fashionable than gold.
Economic and political uncertainty
During volatile economic times, the economy can be bad and affect the price of commodities. The price can go up and down in response to what is happening to the broader economic climate.
Politics can be volatile. Take the election season. The economy will react to a situation or a political candidate based on the policies that he stands for. If they are all for it, then the markets won’t be that volatile. However, if there is uncertainty and instability in the political landscape of a certain country, this could affect the markets. The price of commodities like gold will reflect this uncertainty.
With all these complicated factors, knowing when to sell your gold might be more of a crapshoot. The simple way to approach the dilemma is to approach gold buyers when you are comfortable with the price when the time feels right for you.