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Gold Prices

Gold Spot Price Today

What Drives the Price of Gold?

There are several key factors which impact gold prices. You should be aware of these when making your investment.

Economic Certainty – Gold prices are often driven by global economic conditions. This is due to the fact that historically, gold is seen as one of the most important stores of value globally. This safe haven status drives investors to buy gold particularly when economic conditions are poor, or the future is uncertain. When people don't trust the markets, they buy gold.

USD Strength – The US Dollar and gold have an inverse relationship. This means that as the Dollar drops in value, the price of gold increases. There are a couple of key reasons behind this point. One is that a Dollar could be seen as a negative indicator for the economic conditions. Another is more practical. Since all gold is usually paid for is US Dollar, a weaker Dollar acts as a disincentive to sellers and suppliers.

Interest Rates – Interest rates are a key factor in the price of gold mainly due to the fact that a continuously low interest rate can result in dropping returns from other traditional forms of investment. If these returns become too low, then investors often move their money into gold for a better return.

Inflation – Inflation can accompany low interest rates, and generally means there is more money in the economy which can essentially lead to reduced value of currency if inflation is not kept under control. Gold also thrives in this kind of environment with prices likely to rise alongside any inflation.

Historical Gold Prices Charts

Why Gold Matters

Gold is the most prestigious, and popular precious metal on the market. This attaches a huge level of importance to the asset before we even make a trade. The fact that gold is perceived as one of the best safe-haven investments in the economic world is of huge importance.

This essentially allows gold to follow a different supply, demand pattern. This is in large due to the fact that the amount of held gold far exceeds the newly mined supply. It means that by buying and holding gold, you can have a big influence on the price.

Gold is often viewed as recession-proof. The thought that gold prices will go up in times of difficulty is another reason why it is so important. It has an intrinsic physical value too which means it can be a key store of value in tough economic times. This has been shown time and again during economic downturns, when the price of gold typically rises.

Of course gold also has practical value in the sense it is used across many industries too. Not only is it an important staple of the jewelry industry, but it is broadly used in electronics as well. All these factors combine with history, and the fact that gold is valuable because society has always perceived it to be. For thousands of years it has been the most sought after precious metal. This value continues right to the present, and attaches a higher level of iconic status to gold.