2006-08-06 00:55:43 · 2 answers · asked by nitin b 1 in Business & Finance ➔ Other - Business & Finance
No. Prices for precious metals are based on scarcity, first. Secondly, the prices are based on fear. If a lot of people think the economy will go soft or if the stock market will go down, they buy gold to protect against such losses. It is a hedge. I am not convinced investing in precious metals is a good idea. You have to guess right in advance and pay a hefty commission to buy and sell gold, as much as 3%. As long as 25 years ago, gold was selling for over $800 per ounce. After accounting for inflation, gold prices today should be at $2,400 per ounce.
The demand for gold is very elastic, meaning it is not a "must have."
The demand for oil is somewhat inelastic, meaning the demand does not drop off when the price rises. There does eventually get to a point where the price rises too high and demand changes. Speculators help drive up the prices of both commodities by bidding high, expecting the prices of both or either to continue to rise.
2006-08-06 01:09:29 · answer #1 · answered by regerugged 7 · 0⤊ 0⤋
yup
2006-08-06 00:59:01 · answer #2 · answered by Humdy 1 · 0⤊ 0⤋