Spanning far beyond the financial industry, gold plays a key role in several sectors such as jewelry and technology. In Part II of our three-part series on the underlying factors driving gold prices, we dive into how demand within other industries can impact the price of gold.
Industry Trends: Jewelry and Technology
Geology.com has deemed gold “the most useful metal” – it’s used in a myriad of sectors including jewelry, technology and even medicine. The demand within these industries has a direct impact on the demand and price of gold.
More than half of new gold mined each year is used to create jewelry. For decades, it has been a staple in the high-end jewelry industry. There is a positive correlation between the price of gold and demand for gold jewelry. Holidays and tradition often factor into demand rates for gold jewelry. For example, take a look at gold demand in India, one of the world’s leaders in gold jewelry consumption. In general, we see a spike in gold demand leading up the country’s annual festival Diwali and wedding season.
Not only is gold resistant to rust and corrosion, but it also is malleable and a reliable conductor of electricity – making it a highly-attractive commodity in the tech sector. It is used to manufacture everything from smartphones to automobiles. More specifically, it is a key component in memory chips, circuit boards and LEDs. Gold demand rises as the demand for technology increases, thus resulting in an uptick in gold prices.
Demand within industries that rely on gold, as well as shifts in interest rates and inflation are instrumental in predicting how gold prices may shift. However, there is always exceptions to this rule. Make sure you don’t miss our blog this Friday addressing what happens to gold rates in time of global crisis and natural disaster.