The price of gold is influenced by various factors and changes over time. Some of the most important factors include:
- Supply and Demand: One of the primary factors determining the price of gold is the level of supply and demand in the market. When demand for gold increases and supply remains constant or decreases, the price of gold rises and vice versa.
- Interest Rates: Low interest rates usually lead to an increase in the price of gold, as people seek to invest in safe assets like gold. Conversely, high interest rates can lower the price of gold.
- Currency Fluctuations: Changes in the value of the US dollar affect the price of gold. Since gold is priced in US dollars, a decrease in the value of the dollar can lead to an increase in the price of gold and vice versa.
- Global Economic and Political Conditions: Economic crises, political instability, and changes in financial and monetary policies of countries can cause fluctuations in the price of gold. In times of uncertainty, people turn to gold as a safe haven, which can drive up its price.
- Inflation: Gold is known as a hedge against inflation. When inflation rates are high, people seek to preserve the value of their assets against the decreasing value of money, leading to an increase in the price of gold.
- Central Banks’ Role: The buying and selling of gold by central banks also impact the price of gold. When central banks decide to purchase gold, demand increases and the price goes up.
