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chound
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Why do prices of gold change in the same country from city to city
How is the price of oil determined?
How is the price of oil determined?
I saw in the newspaper these bullion rates:The price of gold itself does not change from city to city - are you talking about jewelry?
That is true. It is relatively easy to construct computer programs that watch the price of the same commoditiy or stock in different markets. If there is a small difference, the program will automatically buy and sell the product at the same time in the two different markets, making an instant profit and driving the prices towards equality. The action point is determined of how much it cost to transport the product to the other market and buy/sell it there.russ_watters said:Well, I stand corrected - maybe its since India is so much larger than the US that they have multiple comodities markets. In the US, pretty much everything financial comes out of New York. In any case, a 1% difference between 3 cities is not very much.
Pretty much all comodities are globally linked though: since there is a finite supply and everyone wants some, the price will naturally be somewhat uniform due to supply and demand. If it was significantly cheaper in India, you could, for example, buy oil in India and ship it to the US for profit.
Aquamarine said:That is true. It is relatively easy to construct computer programs that watch the price of the same commoditiy or stock in different markets. If there is a small difference, the program will automatically buy and sell the product at the same time in the two different markets, making an instant profit and driving the prices towards equality. The action point is determined of how much it cost to transport the product to the other market and buy/sell it there.
As a small investor, it is probably not possible to do this. Fast computers, programs and data is requred and all of these cost big money.
Russ waters said:Well, I stand corrected - maybe its since India is so much larger than the US that they have multiple comodities markets. In the US, pretty much everything financial comes out of New York. In any case, a 1% difference between 3 cities is not very much.
It is trivial which is why it is done by large, well-capitalzed firms that compete which each other so intensely that profit margins is extremely small. You must make many and big trades in order to make an interesting profit. Also, in order to make a profit you need to be quicker than the competitor which means faster computers, programs and above all data. And you need the lowest possible cost of capital and commissions, something that is only given to those using a huge sum of money very often. For example, if you have a computer system trading thousands of times every day, the commission cost will be very low per trade.so-crates said:No actually it would be quite trivial to do - but brokers commissions will make that 1% difference irrelevant.
Well, that is mostly up the the government. If they set the price lower than the cost of production, the companies will loss money and eventually go into bankruptcy. If they only allow a very small profit, the oil companies will make less investments in India since the capital required can gain greater profits in other markets. If they set prices higher than the rest of the world, there will be great profits for the companies. Obvisously such a system promotes corruption.chound said:The govt fixes the price of oil here in India. How do the oil companies get profit?
chound said:I saw in the newspaper these bullion rates:
Chennai:
Bar Silver Rs.11,905
24 ct gold(10 g) Rs 6,580
22 ct gold (1 g) Rs. 609
Mumbai:
Silver Rs 12,310
Standard gold Rs 6,635
Delhi:
Silver(.999) Rs 12,150
Standard gold Rs 6,660
Soverign Rs 5,400
Though the threee cities are in same country, the prices are different.
chound said:About petroleum, are the prices in different countries linked. For eg, last month or so I read that oil costs $50 per barrel in New York Stock exchange. But why did the prices in India get affected?
Hi ,Aquamarine said:That is true. It is relatively easy to construct computer programs that watch the price of the same commoditiy or stock in different markets. If there is a small difference, the program will automatically buy and sell the product at the same time in the two different markets, making an instant profit and driving the prices towards equality. The action point is determined of how much it cost to transport the product to the other market and buy/sell it there.
As a small investor, it is probably not possible to do this. Fast computers, programs and data is requred and all of these cost big money.
There are several factors that can influence the price of gold and oil, including supply and demand, geopolitical events, economic conditions, and investor sentiment. For example, if there is an increase in demand for oil due to a growing economy, the price of oil may rise. On the other hand, if there is a decrease in supply due to political instability in oil-producing regions, the price of oil may also increase. Similarly, changes in interest rates, inflation, and currency exchange rates can also impact the price of gold and oil.
The relationship between gold and oil prices is often inverse, meaning that when one increases, the other tends to decrease. This is because gold is seen as a safe-haven asset during times of economic uncertainty, while oil is a more volatile commodity that is heavily influenced by economic growth and demand. Therefore, when investors are worried about the economy, they may invest in gold, causing its price to rise, while the demand for oil may decrease, causing its price to fall.
The prices of gold and oil are primarily determined by the forces of supply and demand. However, there are also other factors that play a role, such as production costs, government policies, and market speculation. Additionally, the prices of gold and oil are influenced by the futures and options markets, where contracts for these commodities are bought and sold based on anticipated future prices.
Global events, such as political instability, natural disasters, and economic crises, can have a significant impact on the prices of gold and oil. These events can disrupt the supply and demand of these commodities, leading to price fluctuations. For example, a war in an oil-producing country can disrupt production and cause the price of oil to rise. Similarly, political tensions between major economies can cause investors to turn to gold as a safe-haven, increasing its price.
Speculators, who buy and sell commodities in the futures and options markets, can have a significant impact on the prices of gold and oil. These individuals or institutions may buy or sell large amounts of contracts, which can influence market sentiment and cause price fluctuations. Speculators often base their decisions on factors such as economic conditions, geopolitical events, and technical analysis, rather than the actual supply and demand of the commodities themselves.