Gold Investing: What Moves the Price of Gold?

Gold has been looked upon as one of the most precious metals in the world, as it retains value and continues to make investors hungry for profits. Long before monetary currencies were produced, people used gold and silver coins for buying and selling items. Gold was regarded to be a valuable asset, even thousands of years ago. As the years progressed, goldsmiths started making jewelry from gold and today, it is used in several electronic devices as well. Investors, people, fashion experts and technical innovators are all so amazed by the value in gold and the huge presence it possesses.

Gold Price Movement

So, what moves the price of gold?

Simply put, there are a ton of factors that move the price of gold, but based on referential data, we can assume that most of the price movement has to do with the following factors and organizations.

USA DollarThe US Dollar: The strength of the US dollar has been regarded as a strong force in keeping gold prices fluctuating around peak limits. A weak US dollar usually indicates a rising gold price, while a strong US dollar would indicate a drop in gold market prices. This is primarily because when the US dollar is weak, investors are likely to place their money on gold, whether it may be through gold exchange traded funds or gold futures.

Bank ReservesBank Reserves: With rising value of gold, many central banks have started purchasing gold to add to their reserves. The central bank reserves in Australia, United States and UK have significant amounts of gold in their reserve, which dictates higher gold prices. These banks are primarily responsible for paper currency, but as they move towards gold investments, it would cause gold prices to rise.

Gold ExtractionGold Extraction and Production: Throughout the past several thousand years, thousands of tons of gold have been extracted and produced for the world. As time passes, miners and refineries are becoming aware that all the easy extraction methods of gold have depleted. It is now required to dig way deep into the earth to find quality gold reserves. This not only costs more, but it increases health factors for miners and the environment. All these additional costs are now being factored into the rising cost of gold. We are now getting much less gold for a higher price, which is going to be a problem in the long run.

Supply and DemandSupply & Demand: This is the most basic concept to take into consideration when looking at how gold prices move. Gold is being used in a number of items, such as electronic devices, cables and jewelry. As the demand for these consumer electronic products, jewelry and medical devices increase, so will the price of gold. Several countries have tons of gold that has been produced into jewelry, such as Dubai and India. These countries remain to be the top consumers among, the US and China. In order to handle the demand of gold, prices will continue to rise to put a limit on what is supplied.

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