Whether you’re Scrooge McDuck and need to source more gold coins to dive into, or just want to start investing in precious metals, knowing how the price of gold is determined can help you make the best financial choices possible. Gold is historically one of the most precious (and expensive) metals on earth, and its current market price affects everyone.

Gold is fixed by the London Gold Market Fixing Limited, and has been since 1919. Prior to World War I, gold was used to back nations’ currencies, but the war caused the gold standard to collapse. Afterwards, the London Gold Market made a deal with South African mines to receive gold and fix gold prices on the open market, which it continues to do to this day.

How is the price of gold calculated in Olathe, KS?

The London Gold Market Fixing Limited, made up of five major banks, “meets” twice a day via conference call to determine how much gold will sell for. They set an opening price and see how many banks wish to purchase gold at that price. If there aren’t enough buyers, the price is adjusted to be lower, whereas if there are many buyers interested, the price goes up. This helps create a universally-accepted price standard, which, in turn, allows banks, miners and other businesses to price their inventory.

If this sounds an awful lot like the principles of supply and demand to you, you’re correct—when there is an abundance of buyers, gold prices tend to go up, while abundant supply and fewer buyers lowers the price. That’s why it’s key to watch the gold market just as closely as you’d watch the stock market in order to know when to buy and sell.

Is gold a good investment?

Typically, gold is a safe investment. The price can rise and fall in the short term, but it tends to be one of the most sought-after precious metals and will command a generous price over the years. If you want to diversify your investments, gold is a wise choice. When the values of paper money and stocks fall, gold’s value tends to rise. Therefore, if you want to make sure that at least some of your investments are making money, even if the stock market crashes, invest some of your funds into the precious metal market.

These days, gold commands around $2,000 per ounce at any given time, and its price has been known to triple in just a decade. Given the looming recession that the United States will almost certainly experience as the coronavirus pandemic takes its toll, we can expect that gold prices may rise even further. If you already have invested in gold, congratulations on your wise choice—but if you haven’t, you should either act now or wait until the economy has bounced back.

Now that you know the factors that go into the price of gold and how it’s calculated in Olathe, KS, stop by Harrison Street Pawn to buy or sell gold yourself.