Factors affecting Gold Price

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Contrary to common beliefs gold prices move up and down just like any other commodity. Since Gold can act as an inflation hedge and a safe escapement during times of economic uncertainties and slowdowns it’s crucial to understand the factors affecting gold prices so that you don’t take wrong investing decisions.

Gold Prices and the US dollar

Gold is quotes in US dollar, this means that those buying and selling Gold must do it in US dollar and therefore when the US dollar goes up it means that buying dollar has became more expensive and this in turn makes buying gold more expensive. That’s why gold goes down when the US dollar goes up and vice versa.

Gold prices and Oil

When Oil goes up the global economy slows down which threatens corporate profits and makes gold a higher yielding investment. Thus when Oil goes up gold prices go up and vice versa.
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Gold prices and Inflation

Gold is considered an inflation hedge, thus investors escape to gold when inflation increases in order to preserve the value of their money. That’s why when inflation rise gold prices rise and vise versa

Gold prices and interest rate on US dollar

When interest rates go up, the US dollar appreciates in value as it becomes more attractive to those seeking higher yields and this turn results in cheaper gold. When interest rates rise Gold goes down.

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Gold prices and the economy

When the economy slows down or when recessions are expected some people escape to gold as corporate prices might decline.

Gold prices and geopolitical tensions

During geopolitical tensions oil prices rises thus resulting in higher prices for gold. The more the geopolitical tensions intensify the higher the prices of gold become.