Factors That Might Have Led to Changes in the Price of Gold

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Set out what happened to the price of gold in 2008 and 2009. Discuss the factors that might have led to changes in the price of gold in 2008 and 2009. In 2008, the gold market dropped from the high of $1,035 to the very low $900 level. This was due to 'investor meltdown' where investors were selling whatever they could to recoup their losses in other markets. More so, in America, many investors had paid from only a 10% deposit up to a 50% deposit, on the shares they owned,so when these share prices dropped more than 10% to 50% investors lost 100% of their capital. There was a low demand for gold so in the demand and supply of economics law, the price of gold dropped and its quantity became less. Investor's selling of investments made price plummet even lower, triggering other selling, causing investors to eventually sell their gold and silver too. As a result, the gold prices plummeted until the it reached the low of $690. The cheap price that gold reached attracted other investors and made it climb up gradually but surely to $878 in 2009. After the so-called "investor meltdown", street-smart investors picked gold up and made the price rise again. (GoldSeek (26 December 2008 ). Question 1b Giving economic reasons, assess why gold prices experienced rapid and generally sustained rises in 2010 and 2011. What appears to have happened to the gold price in August 2011 and why? Demonstrate using a supply and demand diagram what happened to the price of gold in 2010

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