What Factors Affect the Price of Gold?

This question preoccupies the mind of everyone who is directly or indirectly related to the investment in gold, in some or the other form. Gold has always occupied a prominent position in determining the global economy. The price of gold is considered as a major indicator of the status of global economy.

There are basically five main factors that affect the price of gold. They are:
1. Value of US dollar
2. Demand for jewellery by the Asian and Chinese markets
3. Central Banks Reserves
4. Production of gold
5. Rise in investments in gold

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The Rise Of Gold And Silver Prices

There are many factors contributing to increased demand for silver and gold rising and therefore pushing prices higher. This article looks at some of these factors and how they affect precious metal prices.

The value of the greenback is falling

The US dollar is often seen as the reserve currency of the world. The US dollar is, however, under major selling pressure as low interest rates are in play and the FED has deployed the massive economic support package which has devalued the dollar.

World Economy

It is widely accepted that high gold value is indicative of troubles with the global economy. Speculators who have historically invested in the dollar are instead looking for other areas to invest their funds and gain higher returns on the outlay.

Institutional investors and funds

A large proportion of the investing in gold and silver is coming from institutions including the massive funds that have to diversify their holding of different instruments. Gold and silver is a more worthwhile investment opportunity for the hedge funds and other large investment groups as interest rates are historically low.

Jewellery

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Why Gold Prices Will Continue to Go Higher

Federal Reserve and Gold Prices

Probably the most important catalyst to understand is the actions of the Federal Reserve. 

It ultimately results in the debasing of the U.S. dollar along with continuing to generate an unsustainable debt level.

So with the debt levels and debasing of the U.S. dollar, that's one of the most important combination of factors in the ongoing rise in gold prices.

Interest Rates

Another major factor that helps support the price of gold is the low interest rate climate.

Gold will continue to be supported as long as that's the case.

Economic Weakness

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