Factors Affecting Gold Prices
Aug 27, 2020
Investors try to analyze the gold market on a daily basis and various factors that could impact gold prices. As it is one of the most significant assets, there are a few common factors that impact the gold price rises and falls.
Firstly, the demand and supply determine the market value. Unlike most other products, gold is not consumable and is relatively scarce. Indian jewelry market is one of the most popular in the world, as many of their festivities and celebrations rely on gold. Hence, with higher demand the price boosts up. India is the second-largest consumer of the precious metal.
Secondly, the value of the gold currency decreases as inflation increases. The interesting part is that when most other investments start to fail in returns, people lay money into gold. Regardless of the value of the currency, the precious metal will maintain neutral towards the fluctuations.
Last but not leastit’is interest rate, which has an inverse relationship with gold. For instance, when the interest rate reduces, deposits do not bring profitable returns, people tend to buy gold causing increase in demand and price. However, when upon the increase of interest rates, individuals sell gold and invest in deposits, hence the interest increases causing drop in demand and price.
Make sure to always stay informed, as it is essential for investors to be aware of such factors prior and throughout the investment period.