Why is Gold So Expensive?

From the ancient Egyptians to millennials, gold has been treasured for its beauty and value. But why is the lustrous yellow metal so expensive? From the demand for its uses as a safe haven investment, currency, jewelry and electronics, the cost of mining and refining to the fluctuating market prices, many factors contribute to the high cost of gold.

Gold's Price History

Gold has been a valuable commodity for centuries, prized for its rarity and beauty. Its history as a form of currency dates back to ancient civilizations, where it was used in trading goods and services.

In the modern era, gold has taken on a new role as a store of value and a hedge against inflation. Investors around the world buy gold as a safe haven asset in times of economic uncertainty, political turmoil and market volatility.

Gold's price history reflects its enduring popularity as a safe haven asset, but it's also heavily dependent on supply and demand. The price of gold has fluctuated over time, driven by various economic, political and market factors.

In the 1970s, gold experienced a period of rapid price appreciation because of high inflation rates and a weak US dollar. In January 1980, gold reached an all-time high of over $2,600 per ounce (in inflation-adjusted U.S. dollars) before entering a period of decline that lasted for more than two decades.

In the early 2000s, gold prices began to rise again, fueled by concerns about the global economy, geopolitical tensions and a weakening U.S. dollar. Gold increased steadily and quickly between 2001 and 2011 with only a few significant dips in between. It reached yet another local peak in August 2020, partially due to COVID-19. 

Today, gold remains an important asset for investors and traders. Its price is influenced by a wide range of factors, including interest rates, inflation, currency fluctuations (especially the dollar) and geopolitical events. While gold's price history has been volatile, it's still considered a safe haven asset, making it a popular choice for those seeking to protect their wealth in uncertain times.

Why is Gold so Expensive?

Gold is one of the most valuable and expensive metals in the world, and its price can fluctuate greatly. The question is, why is gold so expensive?

Several factors contribute to gold's high price tag. One of the main reasons is its rarity. Gold is a finite resource that is not easily found in large quantities. Because of this, mining and refining gold is a complex and expensive process, which further contributes to the metal's high cost.

Another reason for gold's expense is its historical use as a currency, store of value and safe haven asset. Times of uncertainty are often when gold performs the best as worried investors trade their riskier investments for gold. It has been a form of currency for thousands of years, and its perceived value has remained consistent over time. Its use as a store of value accounts for a large portion of the global demand for gold, which in turn has been a major driver of its price.

Global supply and demand for gold also play a significant role in its price. As developing countries continue to grow and expand, their demand for gold increases. The increased demand, coupled with a steady or decreasing supply, can drive up the price of gold. It's also possible that geologists may find more large gold veins, increasing the supply and likely dropping the price. 

While its price can be volatile, gold remains an important asset for investors seeking to diversify their portfolios and protect their wealth in uncertain times.

Where to Buy Gold (Direct Delivery and IRA)

You can access a few options when it comes to online gold and precious metals dealers, but some are much better than others. A few of the best precious metals dealers that offer direct delivery and IRA purchases include Advantage Gold, Birch Gold Group, Red Rock Secured, American Hartford Gold, Augusta Precious Metals and Lear Capital.

Red Rock Secured has a relatively low minimum required investment, so it's especially great for anyone looking to make a smaller investment or start slow. Red Rock Secured is also a good choice for precious metals IRAs, but Advantage Gold is best known for its IRA rollovers.

Is Now a Good Time to Buy Gold?

Now could be a good time to buy gold if a few things go your way. Lots of factors could make the price of gold spike or fall, but some that you should keep an eye on are a weakening dollar, Fed policy, a recession and geopolitical crises. You can learn more about gold and precious metals investing on Benzinga’s precious metals hub.