Factors influencing the world price of gold

Factors influencing the world price of gold


Today, gold no longer plays a leading role in the world economy as it did before when the world's main currencies were backed by this precious metal. But at the same time it remains one of the most convenient and popular investments for both large players and private investors.

The point is that the main synonym of gold as an object of investment is stability. This is an eternal value that does not depend on world trends, discoveries or new players.

However, the price of gold does not remain the same: the precious metals market also has its own patterns that cause the value of gold to rise or fall. What factors affect the price of gold?

There are five such factors that have the greatest impact. Let's look at them in more detail.

Inflation rate

It cannot be said that inflation is critical for the price of gold, but it still has an impact. On the one hand, as soon as currency inflation rises, you will have to pay more depreciated money per ounce of gold. On the other hand, gold does not depend so much on the purchasing power of the currency, because its demand for industrial purposes is not as high as, for example, oil. And with inflation, the price of gold may either remain stable due to this independence, or rise slightly due to low investor confidence in other types of investment during inflation.

Exchange rate fluctuations

Despite the fact that gold is not used as a currency today, it remains a reserve currency instrument on the world market. This means that fluctuations in the exchange rate of any currency entails a change in price of gold. The cheaper the US dollar, the higher the price of gold.

World crisis

Perhaps this is one of the most important factors for the price of gold. Analysts have drawn a clear correlation between the price of gold and the state of the world economy and the mood of the population. Thus, the prospects of war, the current pandemic, terrorist attacks have a strong impact on the value of gold: during the crisis, people are more willing to invest in stable investment objects, and gold is an example of such stable investment.

The level of confidence in gold remains at the same level, which is not the case with stocks or cryptocurrencies.

Interest rates of securities

The increase of interest rates in the stock market leads to lower gold prices. By itself, gold does not bring interest income like stocks, and as soon as interest rates on stocks and bonds begin to rise, gold begins to fall in value.

Fluctuations in supply and demand

The balance of supply and demand in the gold market is generally stable. But in recent years, for example, we see the increase in gold prices due to the fact that global gold miners are gradually reducing gold production by + -1% per year, while the demand for it is growing, especially in Asian countries, experiencing rapid economic growth.

If we consider these factors altogether, it becomes clear that the determining factor for the price of gold is the level of investor confidence. During periods of stability and growth of the stock market, interest in gold decreases, and its price may gradually decrease. But in times of global stress, inflation and falling stocks, gold is becoming an important reserve tool, confidence in which is consistently high.

That is why the gold market is now on the rise. And everyone can invest in precious metal. At Golden Way, we will help you invest in gold bars on the most favorable terms and use them to generate income.