14 Factors That Affect The Price of Gold

Gold Price: Factors that affect the gold price | Why Gold Price is Increasing?
  1. Gold is a barometer of investors’ confidence

    When investors have strong faith in the stock market they move away from safe investments such as gold, and head for riskier ones such as stocks. Gold can be considered a barometer of investors’ confidence.

  2. Geopolitical tensions

    When geopolitical tensions arise, people run to safe investments such as gold. Wars, terrorist attacks, threat of wars, or tension between countries that might lead to war are factors known to increase gold prices.

  3. Quantitative easing

    When central banks increase money supply to markets, the value of the currency becomes weaker and so people run for gold to keep the value of their money.

  4. Weak dollar

    As the dollar weakens, gold becomes more attractive to buyers since it’s usually priced in dollars. When the dollar weakens against major currencies, gold prices usually go up.

  5. Financial crises

    When a financial crisis happens in a major country, it might affect the global economy. People might run to gold to stay safe in case the global economy weakens.

  6. Global demand for gold

    Some countries consume gold more than others such as India and China. When the demand rises in one of those countries, gold becomes more scarce and so its price increases. (See Why do people love gold?)

  7. Countries stocking up on gold

    Some central banks start stocking up on gold for various reasons. Usually, when a big country does so, it forces the prices of gold to rise.

  8. Natural disasters

    Natural disasters including tornadoes and earthquakes lead to increased gold prices. Generally, any environmental factor that results in fear increases the demand for gold.

  9. Production of gold

    Several factors affect the production of gold in mines. Generally, the smoother the production process is, the more stable the price of gold becomes. Sudden shortages or over supplies usually affect gold prices directly.

  10. Low interest rates

    When interest rates go lower, people become less interested in keeping their paper money and they prefer to buy other commodities that might go up in price.

  11. Central bank reserves

    Central bank reserves of large countries can affect the prices of Gold. Because reserves can be used to control inflation, any significant reduction in reserves can be a sign that inflation is on the way and so Gold prices might rise.

  12. Uncertainty

    Investors hate uncertainty. When the future of the economy becomes uncertain, so many investors turn to gold until the picture becomes clear. (See Why do people hate uncertainty?)

  13. Inflation

    When inflation rises or is expected to rise, people turn to gold to keep the value of their money.

  14. When the US government’s borrowing increases

    When the US government borrows more, people might conclude that debt is getting out of control, and as a result, they might buy gold because they expect the dollar to weaken.

Leave a Reply

Your email address will not be published.

Related Posts