The Nature of The Beast: Price Fluctuations

Day 1,248, 11:11 • Published in Canada Canada • by Bush Warsocks


This is a continuation of my previous articleThe Nature of The Beast: Supply and Demand that I suggest you have read first.

Gold price fluctuations are sometimes a big mystery to people. When Supply meets Demand, it does so within boundaries having different ranges. As people ultimately want gold, these boundaries are set by the currency to gold price.

Take a look at the following chart. It shows prices that currency can be exchanged for gold. As gold cannot be sold for less than it can be purchased, additional value is added.


You will notice the difference between the low and high price, indicated as the spread, increases disproportionally. What this means is, the range the price can fluctuate increases with the price.

When the selling price increases above the allowable spread, people may choose to offer currency at the next rate up and still have enough to earn money. This can create considerable shifts in either direction, sometimes adding pain to discomfort.

The following is another way of illustrating how much the price may fluctuate, based on the sell price:



Now apply it to a low/high curve and you can see the final picture:



Like I say, there's always more to it than that, but I hope this gives you an idea of why things behave the way they do.

Signed,



Brought to you by: