What Causes the Price of Gold to Fluctuate?

Currency Inflation

This perspective is inaccurate. Inflation is technically an increase in the money supply. This has a direct effect on how gold prices move in relation to a country's currency.

To explain, suppose you used every U.S. dollar to purchase every product in the world.

Gold is used as an exchange unit of value because it cannot be arbitrarily produced. It is a near-perfect store of value against supply and demand.

Central Banks

The above discussion leads directly into the role of central banks in the context of how they influence gold prices. They can do so in two distinct ways. First, central banks can decide to sell a portion of their reserves or buy more on the market. The amount sold each year is limited to 400 tonnes to help avoid a glut in the market that drives gold prices downward.

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