Factors Affecting Gold Price

Factors Affecting Gold Price


There are many factors that influence the price of 24 karats gold in India, and before we discuss about it, let us clarify the difference between "value" and "price" of gold coin. The price is the amount of money you pay when you buy a coin. On the other hand, value is the money you get when you sell it.


Seasonality: Prices of gold coins depend on the season.

Demand and Supply: With its huge tradition and culture of buying and saving gold, India is responsible for 27% of the demand for gold in the world

Inflation: In India price of gold coins are greatly swayed by inflation.

Collector's Coin: If you are into buying mint or bullion coins, then other factors like demand and supply influence its price.

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To spur growth in the U.S. economy, the Federal Reserve has kept interest rates near zero percent and engaged in two rounds of quantitative easing. This has increased demand for the precious metal as a hedge against a declining dollar and inflation. Greece recently announced the largest restructuring of sovereign debt in history and Ireland and Portugal have also sought bailouts. Gold offers "the ultimate downside protection" during situations like this, said Rachel Benepe, co-manager of the First Eagle Gold Fund [according to Bloomberg].



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Barclay's Capital expects gold to average $1875 in Q4 2011 and $2000 as an annual average in 2012. Barclay's Capital Analyst, Suki Cooper, suggests global economic problems will keep investor appetite positive in the year ahead. As well, central banks will be net gold buyers.

Citigroup is of the view that if sovereign debt problems continue and get out of hands, gold will take a sharp and short spike between $2000 and $2500. In the long-run, however, Citigroup believes gold will remain above $1200 an ounce.

Commerzbank's technical strategist, Axel Rudolph, believes gold could reach $2,000 in 2011 if another crisis hits us. In reality, we haven't really been out of a crisis. The global economic crises has been around since 2008 and its growth consequence will be felt for at least the next couple of years.

GFMS's Gold Survey indicated gold could easily reach above $2000 in 2011 and 2012.

HSBC's estimate for gold is around $2025 for 2012 and around $1850 for 2013. HSBC predicts a 10-year precious metals bull market. HSBC cites few persistent market developments including euro zone debt crisis, trade and currency issues between US and China, and global growth issues.



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