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4 Factors That Change The Gold Price

4 Factors That Change The Gold Price

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4 Factors That Change The Gold Price All Entries

4 Factors That Change The Gold Price

Over the past year and a half, the gold price has gone up significantly.  If you've ever wondered why the gold price rises or lowers, there are four crucial factors that come into play.  

Supply and Demand

Simple supply and demand economics is one of the things that can change the gold price.  As with any other commodity or service, if you have something with increased demand, yet have a low supply of that commodity or service, the products or services will have a higher price.  Alternatively,  if something has an oversupply but little to no interest, it can make prices lower.

Crisis Commodity

Believe it or not,  silver and gold prices rise when people have a lack of confidence in the financial market - or their government.  This is often called a Crisis Commodity.  World events actually have a great impact on the gold price because gold is viewed as a source of security among tumult - both economically and geopolitical.  For example, when the first Gulf War  started the gold price softened to around $386.  Meanwhile, the price of gold spiked considerably when Russian Troops made their way into Ukraine in 2014 at $1,199.

Even looking at 2011, in 2010 the close was $1420.  While in 2011 the price went up 7.80% to $1531.  

As you can clearly see world events definitely have an impact on the gold price and whether it goes up or comes down.

The US Dollar

The US Dollar is considered the most dominant reserve currency.  Because of this, it's one of the few main currencies that countries hold for international trading.  The gold price vs the strength of the US Dollar work either for or against each other.  For example, when the US Dollar is strong, gold is weaker.  But, when the US Dollar is weak, gold is stronger.

Jewelry/Other Industries

There are also other factors that might drive up or slow down the price of gold.  One of these factors is the jewelry industry and other industrial and medical industries.  Gold, especially in the US, India, and China, are 3 places where gold has the biggest demands.

In the US if you have gold you are considered wealthy.  In India, gold is still considered a type of currency.  In China, gold means opulence or wealth.  These three countries also have other things in common besides how they look at gold.  All three readily use gold for items such as jewelry, heart stints, electronic devices, GPS systems, etc.

The demand for this material and the need for it not only in jewelry but other products, hikes the price of gold upwards.

According to Archaeologists, gold has been mined and prized for over 5,000 years.  This precious metal is likely to remain a popular material to purchase, whether the price inflates or not.  If you plan on being one of those people who buys gold, this is not something you want to hastily get into.  You need to understand that the gold price will be impacted by supply and demand, money supply, how mighty the US dollar is (or isn't!), financial or geopolitical changes in the climate and actions taken by banks.

Essentially the value of gold remains pretty stable in the long run, but it will fluctuate depending on world events.

If you would like to buy or sell gold or you are curious to learn more about the price of gold right now, visit Ralph Mueller & Associates or call 480.949.9229