Factors that affect Gold prices

The prices of Precious Metals fluctuate every millisecond. But what exactly affects or determines the prices? Supply and demand? Of course, that is one of the many common answers we hear. Let’s look at some of the other factors affecting the prices of Precious Metals today!

 

Dollar Index
The Dollar’s strength and weakness can affect Gold prices as the value of Gold and Dollars are inversely related. When the Dollar value increases, Gold prices tend to be lower, and vice versa when the Dollar value decreases.

 

Inflation
Gold is often seen as a safe haven to hedge against inflation due to its ability to retain value amidst falling economies based on past historical data. When Dollar weakens, it will most likely drive inflation rates up and cause Gold prices to spike. We can view Gold as an alternative currency to hedge against inflation in a broader sense.

 

Economic factors/events
Let’s take the recent Russia-Ukraine War as an example. Upon Russia’s invasion of Ukraine, Gold surged to a high of over US$2,000/oz right after the announcement of the Russian oil import ban by the United States. Investors had rushed and opted for Gold as a safe haven with the invasion and information, driving prices up as demand surged.

 

Demand and Supply
Gold is a highly coveted commodity that has been used for a variety of purposes such as consumer goods or industrial sectors such as Gold jewellery, dentistry, electronics and more. When the demand for these increases, the prices of Gold will rise; also, when there is a scarce supply, the prices will increase too. For example, if lesser Gold is mined and the amount of Gold is not sufficient to meet global demands, Gold will experience a surge in price. Therefore, demand and supply play a crucial role in determining Gold prices.

 

I hope you guys have a better understanding of the factors that affect the price movements of Precious Metals. You may also wonder why different Bullion dealers or platforms offer different spot prices. We have discussed this topic before, and you can read more about it here.

 

If you have any questions, please feel free to contact us to understand more. In the meantime, stay safe!

 

Evonne