Gold and terrorism

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In recent times, gold prices have fluctuated significantly. For example, from 2008-2013, gold prices increased by approximately 200% and reached an all-time high figure of $531.98 per 10 grams. Since then, it has been experiencing a decreasing trend with the current price being $430.28 per 10 grams. The unprecedented rise was mainly due to the global economic recession, which resulted in investment in gold instead of other failing financial instruments. In the context of gold prices, it is important to understand the basic forces which naturally or artificially control gold prices.


Effect of global market indices and Oil prices on gold The global indices are known to have a significant effect on the gold prices worldwide. From December 2013, when the US NASDAQ rose by 10%, France’s CAC rose by 4.4%, Germany’s DAX rose by 2.78%, and Brazil’s Bovespa rose by 13%, the attractiveness of gold as a safe investment has declined. This has also contributed in generating a 5% decrease in global gold prices to $1,218/- troy ounce. When interest rates rise, the yields on bonds and other money market options also rise, and make them more attractive to investors in comparison to gold. In addition, it is believed that the price of gold is also affected by the price of oil to a large extent. Higher oil prices reflect slow growth and so investors are driven to find alternative sources of investment like gold.


Financial terrorism in the gold market Contrary to widespread belief, it is important to understand that the price of gold is not determined in the markets where gold is bought and sold physically, but rather in paper futures markets where trade speculators place their bets on gold prices. The big hedge funds trade the various gold futures. When they buy, they pre-assign a ‘stop-loss’ order within their computer programs. The purpose of this stop-loss order is to sell at that specific price automatically.




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