Impact of Demand and Supply on Gold Prices: An Economics Report

This report provides an economics-based analysis of the gold market. It begins with an assessment of how rising demand and falling supply influence gold prices, demonstrating their impact on price levels. The report then evaluates Richards' statement regarding gold as money, considering the principal functions of money. An interpretation of a provided diagram, illustrating the decrease in global gold production, is presented, showing its effect on gold prices when demand remains constant. The report also determines whether the gold market operates as a perfectly competitive market, citing the characteristics of identical products, the inability of marketers to control prices, and increased buyer awareness. The conclusion summarizes the significant influence of demand and supply on gold prices and reinforces the perfectly competitive nature of the market. The report references relevant books, journals, and online resources to support its findings.

Economics

Table of Contents
INTRIDUCTION.............................................................................................................................3
1. Assessing the extent to which rising demand and falling supply may result into higher gold
prices............................................................................................................................................3
2. Evaluating the Richards’ statement by undertaking principal functions of money.................4
3. Interpreting the below mentioned diagram and presenting results..........................................4
4. Identifying that gold market is perfectly competitive or not...................................................4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6

INTRIDUCTION
Economics may be served as a branch of knowledge that is highly concerned with the
production and consumption. Such field of study lays high level of emphasis on the manner in
which people make use of resources and make suitable decisions. The present report is based on
case scenario which will provide deeper understanding about the economical graphs and
presentation related to gold.
1. Assessing the extent to which rising demand and falling supply may result into higher gold
prices
By taking into account the above mentioned chart or graph it can be presented that on
increase in demand of gold price level increases to the significant level. Chart clearly presents
that when Q shifted from Q1 to Q2 then price of gold also moves in similar direction. From the

evaluation of article, it has been assessed that when demand increases and supply level decreases
or remains constant then it may result into increase in the price of gold (Kumar, 2016).
2. Evaluating the Richards’ statement by undertaking principal functions of money
According to Richards’, gold is a form of money because movements which take place in
such aspect highly influences global currency level significantly. By considering the functions of
money it can be stated that Rickard’s statements is highly appropriate. Moreover, money is the
medium which in turn facilitates transactions to a great extent (Rising Demand, Falling Supplies
Equals Higher Gold Prices, 20417). Thus, on the behalf of gold individual authority can do
contracts and would become able to meet monetary requirements.
3. Interpreting the below mentioned diagram and presenting results
The above depicted graph presents that global production level of gold decrease. In this
case, demand is constant but there is a decrease in supply aspect. Hence, it can be stated that
price of gold will incline when supply decreases and demand remains constant (Seay and You,
2016).
4. Identifying that gold market is perfectly competitive or not
From assessment, it has been identified that gold operates in the perfect competitive
market because in this all the firms are selling identical products to the customers. Besides this,
in the case of gold marketers are not in position to control market price. The rationale behind
this, demand and supply are the major factors that have high level of influence on price of gold.
In addition to this, now awareness of buyers also increased significantly regarding purchasing

aspect and purity of gold (Ahmadi, Behmiri and Manera, 2016). It shows that buyer have
complete information about gold and related investment aspect. By considering all such aspects,
it can be said gold is operated in perfectly competitive market.
CONCLUSION
From the above report, it has been concluded that demand and supply are the major
factors that have great influence on the price of gold. Besides this, it can be inferred that gold is
operated in highly perfect competitive market. It can be seen in the report that price of gold is
affected to the significant level when supply level decreases and vice versa.

REFERENCES
Books and Journals
Ahmadi, M., Behmiri, N.B. and Manera, M., 2016. How is volatility in commodity markets
linked to oil price shocks?. Energy Economics. 59. pp.11-23.
Kumar, N., 2016. Empirical Evidence on Indian Exports of Gold Jewellery Products and Its
Trade Partners. Journal of International Economics. 7(1). p.4.
Seay, J.R. and You, F., 2016. Biomass supply, demand, and markets. Biomass Supply Chains for
Bioenergy and Biorefining. p.85.
Online
Rising Demand, Falling Supplies Equals Higher Gold Prices. 2017. Online. Available through: <
https://dailyreckoning.com/rising-demand-falling-supplies-equals-higher-gold-prices/>.
[Accessed on 29th May 2017].