As you can imagine, the price of scrap gold fluctuates daily according to global demand. In general, the price of gold does increase, and has been doing so for years. The financial crisis between 2008 to 2012 has been the reason for most recent surge in prices, as investors seek to invest in something more stable and tangible.
A direct effect of the increase in gold prices has been the increase in value of scrap gold. Since gold is a finite resource, melting down scrap gold is considerably more cost effective method of finding gold than mining it. These days, gold isn’t found in nuggets any more, it’s chemically extracted as flakes from tonnes of rock. The chemical extraction process is particularly expensive, which is also driving up the price of gold.
Today’s Scrap Gold Prices
| Scrap Gold Type | Price Now (£ per gram) | Price 1 year ago (£ per gram) | Difference | Percentage Change |
|---|---|---|---|---|
| 9ct Gold Scrap | £10.851 | £10.142 | +£0.709 per gram | 7.0% increase |
| 14ct Gold Scrap | £16.928 | £15.821 | +£1.107 per gram | 7.0% increase |
| 18ct Gold Scrap | £21.703 | £20.284 | +£1.419 per gram | 7.0% increase |
| 22ct Gold Scrap | £26.506 | £24.773 | +£1.733 per gram | 7.0% increase |
Please note: These value comparisons are derived from scrap gold prices from 11/05/2011 and 11/05/2012 respectively.
Reasons for the increase in Gold Prices
There’s actually no single reason for the rise in gold prices, but actually there are a whole collection of triggers and influences. Although one or two factors will have more impact than others on the price of gold, none of them are completely isolated.
Some of the reasons for the rises include (in no particular order):
- Financial Institution Instability – how many banks went out of business during the 2008 market wobble? As people have become less trustful of financial institutions, tangible assets such as gold have become more popular.
- Media Influence – although having 24-hour news can be a useful benefit, the media does impact the markets to a surprising degree. So if the media reports that gold prices are rising, more people tend to buy gold. Nobody wants to feel as if they are being left out.
- Currency Instabilities – problems with the traditionally stable dollar and the Euro have lead to an increase in trading in gold. If a currency that was once stable is now showing weakness, investors will look for alternatives. A conventionally stable alternative is usually precious metals, such as gold, silver and platinum.
- County Instabilities – counties with massive debt deficits have been hitting the news over the last couple of years (particularly the US and European Countries). Countries are usually considered ultra-stable, so any instability causes investors to worry and look for safe havens.
- Resistance against inflation – interestingly, gold appears to increase in line with inflation. Therefore gold you purchased 10 years ago should still be worth the same now (or better) in actual monetary value.
As you can see, many of the reasons are based on fear, which therefore increases the demand for gold, and therefore pushes up the buying price (due to conventional supplier and demand rules).
Historic Gold Prices
As you can see in the graph below, there was a sharp increase in the price of gold in 2008. Up until 2008, the price of gold was relatively level and stable.
