ECONOMICS Essay Example | Topics and Well Written Essays - 1500 words

ECONOMICS - Essay ExampleThe recovering signs of the world economy repayable to good performance by the policymakers led to the chance of gold prices as the demand for gold fell due to prouder return on enthronization in other class of assets. Gold, Long a Secure Investment, Loses Its Luster Background overview During the period of economic recession, the prices of gold soared and became the sought after investment for the investors. The filch in the prices of gold meant that the world economy was not performing well. Due to the economic recession and the global financial meltdown from 2008 to 2011, the gold prices reached its highest peak in 2011. This could be observed from the producer price index as given below. Due to the crisis in the economy, the total factor productivity of the nations was hit and the factors of production were bear upon due to the downturn of the economies. The crisis in the economy gave rise to a situation of liquidity crisis. The fall in income level s of the people led to the fall in usage demand in the economy. Due to this, the productivity of the business houses and industrial bodies fell. The fall in revenue and profitability led to the erosion of wealth of the shareholders and market investors. on with this the erosion of confidence of the investors on the ocellus performance of the companies led to the fall of valuation of the companies and market indices. As a replacement for the investment in stock markets, the investors confided on the investment in gold markets (McGuire, 2010, p.37)1. The investment in gold was considered to be lucrative as prices of gold increased on the back of high demand for gold. An investment in gold offered higher returns on investment and there was no erosion of wealth from the amount of investment. Apart from that gold could be sold at both point of time and was considered as marketable investment. The presence of large number of buyers gave the opportunity to transform it into cash at any point of time. All these factors led to the rise in the prices of gold. Investment in gold was deemed to be an investment that would in which the returns obtained would never be lowered (Northcott, 2010, p.46)2. The counterfeit in he gold prices over the last few years fuelled by weak economic conditions has been represented below. Demand and Supply Analysis The mutant in the price of gold could be explained from the demand supply curve for gold as given below. As the demand for gold rose in a weaker economic condition, the demand curve shifted from position 1 to 2 depicted by the red line. As a result, in order to fight back a position of equilibrium with the supply, the prices of gold rose from P1 to P2. The reverse is also true for fall in prices for gold as a result of fall in demand. Gold looses its luster Rational behind plunge in gold prices The unexpected plunge in the prices of gold in recent generation has occurred as result of recovery in the performance of the econo mies all over the world. The correct strategies adopted by the policymakers in order to maintain a becoming balance of supply and demand in the economy, controlling inflation through appropriate interest rates, fiscal and monetary policies have led to turn well-nigh of the economies of the world. The economic reforms and recovery from the economic recession led to improvement in the performanc