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.
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.
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.
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.
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.
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?)
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.
Natural disasters including tornadoes and earthquakes lead to increased gold prices. Generally, any environmental factor that results in fear increases the demand for gold.
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.
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.
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.
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?)
When inflation rises or is expected to rise, people turn to gold to keep the value of their money.
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.
14 Factors That Affect The Price of Gold
Gold Price: Factors that affect the gold price | Why Gold Price is Increasing?