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Gold has been popular as a commodity for many years. This is largely due to its relative lack of price volatility, high level of liquidity and the perception of gold as being a proven store of value.

Unlike most other commodities, supply and demand isn’t the biggest driver in the gold price. Once gold has been mined, it isn’t going to disappear and little of it is consumed, so the amount of metal in the world continues to climb. Many societies throughout human history have turned to gold as the ideal metal for producing coins, although gold coins are rare in modern times.

The gold standard has played a huge role in monetary systems over the years, with many countries pegging their currencies against the value of this metal. Numerous nations have also stored vast quantities of the precious metal, as a way of hedging against possible rises in inflation or currency devaluation. All of these factors mean that the price of gold is one of the most keenly observed figures in the financial markets.

The price of gold is generally steady, which is why it’s so widely used as a safe haven and to diversify investments. Yet, it can also suffer troughs and peaks, just like any other kind of investment. In many cases, the factors that affect the value of gold are different from those that influence stocks and other commodities, giving it an important role to play in diversification strategies.

One of the interesting aspects of the gold price is that it often rises in times of economic turmoil, as more people turn to what they see as a safe, tangible type of investment. This helps to explain sharp increases such as that seen in 1980 when military conflict in Afghanistan followed on from a period of inflation and other negative factors.

About 2,500 tonnes of gold are produced every year, but the amount of the metal mined doesn’t have a huge impact on the price. Instead, this largely comes down to market sentiment and the underlying economic situation.

Gold bullion bars and coins are the easiest type of investment in this metal to understand. They can be purchased simply online and the investor doesn’t even need to physically store them.

Some of the largest exchange-traded funds in the world invest in gold. While this may be seen as a more convenient way of investing in the metal, it also introduces new risks that turn this into a more complex way of putting trading gold.
Gold futures and options can be traded online, giving another convenient method of investing. These instruments are based on the future gold price, and are often used for hedging purposes.