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4 Factors That Influence Gold's Price

By    |   Sunday, 12 July 2015 01:14 PM

Gold's volatility in the market can be shaped by economic as well as political factors, both at home and around the world.

Here are four factors that influence the price of gold.

1. Benchmark Data Reports
Labor market fluctuations, as measured in federal reports on gross domestic product, for example, can send gold prices atwitter with news that certain weaknesses are apparent, The Wall Street Journal said. Recent reports that showed the dollar remaining strong held down gold prices as new interest-rate policies from the Federal Reserve loom on the horizon.

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Gold prices tend to reflect the ratio of U.S. public debt to gross domestic product, Market Realist reported. This shows investors’ fears about the economy and their faith in gold.

2. Central Bank Influences
The health of central banks around the world also affects gold. Many continue to purchase gold to strengthen their reserves as their own hedge against a future unstable currency, Bloomberg reported. Central banks’ 2014 purchases marked the second-biggest increase in 50 years, adding 477.2 metric tons of gold to their reserves, Bloomberg said.

Central banks hold about 20 percent of the world’s gold, giving them a big influence on sales, purchases and price of the precious metal, according to Market Realist.

3. Inflation
Inflation's effect on gold prices cannot be understated. Gold demand goes up as inflation rises, Market Realist notes. Conversely, when inflation is low, gold demand tends to remain low. Gold stock reacts negatively as inflation slows. If the Fed can control inflation through interest rates, gold prices should stay stable.

4. Better Areas For Investment
If the stock market is surging, investors may sell off fickle gold interests to invest elsewhere and earn more. With gold seen as more a long-term investment, not a quick-hit moneymaker, other market-driven opportunities could seem more attractive as bond, commodities and stock markets are doing well.

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Gold's volatility in the market can be shaped by economic as well as political factors, both at home and around the world.
gold, factor, influence, price
Sunday, 12 July 2015 01:14 PM
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