Factors Affecting the Price of Gold
For thousands of years, gold has been and remains the most popular precious metal used to store capital.
But to make a successful investment or sell an asset before the price drops, you need to clearly understand what factors influence the price of gold.
When trading precious metals, one should focus on key events rather than on price change announcements and the start of a frenzy.
Today, there are 7 main factors that have a significant impact on the price of gold during exchange trading.
What influences the price of gold: 7 main factors
Global crisis – this category includes almost all negative processes observed in the economy, finance or politics.
Gold prices rise during military conflicts, pandemics, and global stock market crashes. A good example is the recent rise in the precious metal following the bankruptcies of American banks and the subsequent decline in banking sector stocks.
Inflation – reports of rising prices and increasing inflation are a great stimulus for an upward trend in the precious metals market.
People try to protect their money from losing value and invest in gold bars or exchange-traded gold.
The price of the US dollar is the main quotation for gold transactions on the exchange, XAU/USD, so it is not surprising that when the US dollar strengthens, gold becomes cheaper, and when the US dollar falls, the price of the metal rises.
Therefore, news that the US dollar has begun to weaken against other world currencies often serves as a signal to buy gold.
Central bank policy – the policy of the US Federal Reserve System has the strongest influence on XAU/USD quotes.
Rising interest rates increase investor interest in government securities and raise deposit rates, which forces many investors to abandon investments in gold.
In addition, central banks are making decisions to increase gold purchases for their reserves, creating large purchase orders, significantly increasing demand.
Market demand – when demand for gold bars, coins or jewelry increases significantly, the number of exchange purchase transactions also increases.
The excitement becomes a catalyst that drives the price up, and the price increase, in turn, creates an even greater desire to buy.
By increasing or decreasing production , producers of precious metals can also easily influence its price.
It is enough to create a gold shortage on the market and the price will rise, or, conversely, to announce an increase in supplies and reduce the value of the asset.
Stock market crashes – when they occur, there is a significant decline in the prices of popular securities and major stock indices .
In such situations, investors panic and begin to look for safer places to store their capital.
By following the news and knowing what influences the price of gold, you can make money on changes in the value of the precious metal.
However, it is not at all necessary to trade exclusively gold bars or coins, which only bring profit in the long term.
A simpler and more profitable option is to purchase gold certificates issued by funds such as SPDR Gold Shares or open CFD transactions through stock brokers - https://time-forex.com/vsebrokery/brokery-zoloto-serebro
