What Affects the Market Price of Gold?

Gold bullion

Gold bullionGold has long been civilisation’s currency of choice. Even today, when we have transitioned to paper currency, it still has a strong, enduring value. But we often see its price rise and fall, sometimes drastically in just a few weeks. What causes these movements and can you benefit from them?

Before you buy gold bars from suppliers like atkinsonsbullion.com, it is important that you have an in-depth understanding of how gold prices work. This will allow you to make informed decisions, and figure out how gold can fit into your portfolio.

The Rise and Fall of Gold Rates

This precious material is constantly changing in value. While there are many things that can slightly affect its price, the biggest determining factors are the following.

1. Central banks – The actions of central banks greatly influence the market price of gold, due to their huge reserves and tremendous buying potential. When banks start buying gold en masse, it heightens the demand. Conversely, when they start selling more, the increased supply saturates the market.

2. The U.S. Dollar – Gold and the U.S. dollar are the two currencies with stable, universal value. As a result, the prices of the two are inversely related; a strong dollar leads to cheaper gold, while poor economic times drive up the demand for it.

3. Commercial demand – Many forms of technology utilise gold, such as medical devices and precision electronics. New breakthroughs in these fields can sometimes influence the price. The jewellery industry is also the single biggest consumer of gold, making it a strong deciding factor.

4. Producers – Gold is a finite resource. Mining companies have had to dig deeper in order to access gold reserves, as most of the easiest to reach deposits are gone. This leads to lower production and bigger costs, which drives up the final price.

In summary, gold is a valuable investment tool that will help you weather times of economic instability. Every investor should put at least some of their wealth in gold. It acts as an excellent hedge against currency inflation, and ensures that you have something to fall back on, no matter what happens.