If you’re a regular reader of financial and investment articles and reports, you’ll often hear gold being referred to as a commodity, which by definition is classed as ‘an item of value with a consistent value regardless of source’, something which is the almost perfect description of Gold, a product that in its raw, refined form is bought and sold in uniform weights and measures and in its processed state sold according to a globally recognised carat scale.
But, gold isn’t technically a commodity, throughout history, almost since the birth of mankind, gold has been used as a currency – the only currency that maintains a central, singular value across the entire world.
Does it actually matter how we classify and regard gold? Yes… While other precious metals like silver and platinum are most certainly commodities, gold, being a currency is subject to different market forces which manipulate its value. Supply and demand effects all precious metals, gold included but being a trans-border currency, gold is bolstered by additional economic factors.
Over time, the price of primary precious metals such as Silver, Platinum and Palladium tends to trend in a similar pattern to rising gold prices yet are more volatile to economic market pressures. During an economic downturn, many investors will look to gold for assurance, while other precious metals, traditional used to a higher degree in manufacture and industry see a decline in demand and a resulting reduction in value.
So while gold is traded as a commodity, it will almost always behave like, and should always be considered a currency.
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