Factors That Influence the Price of Gold
The global gold market both affects and is affected by movement in the world’s financial markets, and is in turn influenced and affected by a number of factors. Individuals, organizations and even countries buy and sell gold for a variety of reasons, and gold prices reflect the current market consensus on many different indicators. A few of the major influences on the price of gold include the following:
Financial experts and experienced investors understand the role gold plays as a hedge against inflation. Many in the market buying gold today are making purchases to add a shield against anticipated losses in the purchasing power of paper currency. History repeatedly shows that the greater the expectation of inflation in the markets, the higher the gold price. With continuing government deficits and rampant printing of paper money, gold prices today reflect significant concerns over mid- to long-term inflation.
The price of gold also reflects the fact that is a highly fungible medium of exchange. Any global crisis that seems to or actually does threaten governments and international stability creates new incentives to buy gold in greater quantities. Gold prices will rise during such a crisis because people and companies are buying gold as security against the failure of normal currency. In fact, any study of peaks in a gold price chart will show a close correlation of gold prices to past global disasters, wars and other catastrophic events.
In today’s economies, governments will sell and buy gold based on various monetary policies and needs. For example, a government may decide to sell or buy gold in large quantities to control a currency value against the dollar. Economists acknowledge the role of gold prices in the global economy, and even with managed float currencies, a country’s gold holdings can influence international confidence in that nation’s currency and level of economic stability.
An increasingly important component of global gold prices is the yellow metal’s role in a number of industrial applications. Especially in technology and electronics, gold serves as a preferred element for many components. There is actually more gold today in a ton of cell phones than a ton of gold ore. Likewise, people buy gold as the most desirable choice for jewelry, just as they have done for centuries.
Supply and Demand
Underlying every market is the issue of supply and demand. As demand for gold increases due to the above factors, the price will rise. The mere fact that all the gold ever recovered would only how sensitive gold prices are to increased demand. Mining and extraction costs continue to escalate and affect supply, so the amount of gold available is increasingly a key driver of gold prices; the overall gold supply remains relatively limited.
Read more about the common factors that influence the price of gold.
Gold Price News
Now that you’ve had the opportunity to learn a little more about buying gold, why not take a look at where the market has been recently? Educating yourself about the market is the smartest way to invest. If you have any questions, please feel free to contact Scottsdale Bullion and Coin. It is our pleasure to inform our clients about smart investments for their future.