The price of gold has declined more than 20 percent so far in 2013. At below $1,300 per ounce, a fair amount of discussion has been happening around the value of gold.
Since gold does not generate any income and it is relatively expensive to store, its valuation has historically been difficult to assess. Recently, with the U.S. dollar rising and interest rates edging up, hot money began to move out of gold exchange-traded funds (ETFs) and into other channels—notably, U.S. equities. Now let’s attempt to assess the value of gold.
Gold has always had its own unique value. Because central banks can print money in large quantities to stimulate the economy, gold, which has a finite supply, will always have followers who view it as a way to preserve monetary value. This is especially true in many less-developed countries where the majority of the population does not have freedom or access to move money and invest in the U.S. stock market.
Historically, families in many parts of the world pass part of their fortunes to the next generation in some form of jewelry and gold. In most developing countries, corruption is a major issue and an especially large portion of the wealth is concentrated in the hands of a small number of people.