Gold is a haven asset par excellence, so the evolution of its price is an indication of the global situation of the economy. Gold also has a significant correlation with some currencies (US dollar, euro, yen, etc.), so monitoring the evolution of its price allows for obtaining precise information on different markets.
Generally, gold is quoted in the North American currency, and the reference unit is the ounce of gold (troy gold ounce), which is equivalent to 28.35 grams, and its price is referenced in dollars/ounce. Even moderately, gold is always subject to fluctuations due to certain factors. Here we mention the most relevant:
Supply And Demand
Like other markets, gold is also subject to the law of supply and demand. There are two elements that influence this aspect: the volume of production at the time and the interest of investors or buyers of the metal. If there is limited supply and increased investor interest, the price will go up. On the other hand, if the supply is wide and there is less investor interest, then the price will go down.
Gold And The Strength Of The Dollar
The ounce of gold is quoted against the US dollar, so the relationship between the dollar and gold remains decisive and inversely proportional. That is, the stronger the US dollar, the lower the price of gold, on the other hand, if the currency depreciates, the price of gold can rise.
Industrial Applications Of Gold
Gold currently has the advantage that it has different industrial applications, an example of this is technological devices, which have some gold components. The exponential increase of these manufacturers is reflected in a greater demand for the metal, which causes its price to increase.
The Price Of Gold And Interest Rates
The interest rate in the stock market influences the price of gold bullion, although it is not a direct relationship (since gold is oblivious to interest rate), if the rate increases, investors look for liquidity and they sell the gold to look for other investments that provide them with short-term returns. On the other hand, if the interest rate falls, gold offers fewer investment costs and the interest on it will increase, which will cause its price to increase as well.
The Jewelry Industry
When the jewelry sector is booming, the demand for gold increases, which will cause its price to increase as well. This mainly occurs because gold is one of the most used and valued metals in that category. An example of this can be the popularity of a specific jewel (for example the jewel called “the face of Jesus” that became popular in some artistic sectors).
