What are the factors that control gold prices?

Since ancient times, gold always has been important. Additionally to its use in jewelry and adornment, this precious metal contains a great deal of economic value and has a market exchange rate that fluctuates every day. Besides gold’s economic importance, what are the main factors that affect its price?

Gold base
Gold has always played an important role in the international monetary system. Gold remained the monetary base for all currency systems, through what is known as the golden rule: monetary systems that used gold as a standard for determining the value of a country’s paper currency. Once a fixed price for gold was adopted, local currencies could be freely converted into gold to a specified amount.

Nada and Simon Naifeh, Owners of Bella Jewelry

War times

During times of conflict, gold is a good investment for both companies and individuals. If people forced to leave conflict zones have to exchange their currency and commodities for gold, gold stands out from many other currencies and commodities. Furthermore, it is also an international currency that can be sold anywhere in the world without the risk of volatility associated with fiat currencies.

In addition, gold is of great importance to countries in times of war and conflict.

“Customers are very worried but gold has proved itself as good and short investment, but people are still shocked with the high prices,” Simon Naifeh, Owner of Bella Jewelry

Meanwhile, media reports have said that Russia has accumulated huge amounts of gold in the past years to help it reduce the economic effects of any imposed sanctions due to the Russian invasion of Ukraine.

There are important factors that control gold prices, such as:

Supply and demand

“Just like in the any other market, gold’s prices are affected by supply and demand – a rise in demand and a drop in supply leads to an increase, and the opposite is true – a rise in supply and a fall in demand leads to a decrease.” Ahmed Essam, glod trading expert in London, Ontario

Gold mining becomes more difficult with time, which is another cause of its continuous rise in price in the long run.

Inflation, interest rates and currencies
Decisions made by governments in this regard affect prices. Low interest rates and high inflation rates lead to an increase in gold prices. The same applies to exchange rates. If the national currency is weak, there will be an increase in gold prices.

Geopolitical Changes

“Political instability, conflicts, and war threats may push up gold prices. There is no way to measure how such matters affect gold prices, as they vary from case to case.” Ahmed Essam, glod trading expert in London, Ontario

Gold prices rose by more than 12 percent this year, according to Reuters news agency, as investors decided to stay away from risky investments in light of the Russian invasion of Ukraine.

“I believe that the political uncertainty has negatively affected the price of the gold in the market. It has increased a lot and it’s hurting the jewelry business in London, ” Simon Naifeh, Owner of Bella Jewelry

What are the factors that control gold prices?

There are important factors that control gold prices, such as:

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