Why Gold Prices Fluctuate

Annual Gold Prices for the past 5 years show that in 2005 the gold price had the biggest annual dollar increase, with an increase of over $80. A chart of prices over the last 30 years looks like a roller coaster.

Gold as an investment has increased in popularity since the financial crisis and world stock market crashes of late 2008, and since then gold prices have delivered a bit of a wild ride. Recent gains continue this trend as gold trades higher amid gloomy stock market reports based on jobs and business activity.

Exploration and development expenditures include all of the costs associated with manpower and activities such as geologists, contractors, engineering, drilling equipment, metallurgical testing and economic feasibility studies.

So far this year, gold has seen its share of sharp increases and periodic corrections, including the one currently taking place in the market. At this point, we’re in summer and we’ve only reached the half-way mark, while anticipation of what lies ahead continues to increase amidst fluctuations in interest rates, the US dollar, hesitation over the Middle East, as well as a host of other influential factors. Offering perspective from the standpoint of major, mid-tier level producers and senior tier explorationists on where things are positioned as we move through this correction period are Golden Peaks Resources Ltd. (TSX-V: GL), Goldcorp Inc. (TSX: G; NYSE: GG) and Alamos Gold Inc. (TSX: AGI).

The gold market has been extremely good to all of us over the past 12 months. It’s gone up $80 or $90 from a year ago. So that part’s been terrific. Of course, in a situation like ours, when you’re trying to grow by acquisition, as the price of gold goes up, the asking price for assets also goes up. It gets more challenging to be able to find acquisition opportunities that are going to really create value for you and your shareholders,  said Goldcorp president Ian Telfer.

Like all prices, the gold price reflects not only the inherent value of gold, but also the relative strength of the currency in which it is quoted. Costs are allocated to a stockpile based on relative values of material stockpiled and processed using current mining costs incurred up to the point of stockpiling the ore, including applicable overhead, depreciation, depletion and amortization relating to mining operations, and removed at each stockpile’s average cost per recoverable unit. While gold is a more stable store of value than paper currencies, it still remains a market in which governments have a heavy presence. Thus, taking into account the ever-shrinking value of the dollar, the real price of gold has hardly changed in a century.

As the future for gold unfolds over the upcoming months, fluctuations in the price will determine whether gold will experience an upswing out of the current correction period. At this point, the summer months have much to unveil, in terms of how far outside factors will drive the price of gold in the market. As each quarter files a chapter in the history of gold’s ascend toward new levels, in retrospect, there may be much to learn from each individual step made along the way. If there is one thing to be said for the commodity, it is that it holds a reflection on current global circumstances.