What Affects The Price Of Gold

Gold has been known to be the most desirable metal on earth. Although it is the most precious metal, there are some issues that gold is facing like its demand and supply imbalance. Gold has been used as an investment and a useful product in electronics, but there are also some factors that affect the price of gold.

One of the biggest factors that affect gold’s price is its amount of supply in the central banks around the world. In 2003 the stock of gold was about 33,000 metric tons, accounting for nearly 25% of all the gold mined in the world. In the same year, 3,200metric tons of gold were supplied to a marketplace of mining and scrap. That means that the stock of gold in the central bank can overrun the market if it is sold, there is enough stock of gold to satisfy its world demand for almost a decade without worrying another ounce of gold being mined.

although gold is very useful, without a gold standard it has only a limited use in the central bank for it does not earn any investment interest. Some central banks in the world had already eliminated their gold supply to minimize its demand.

Except for its supply and demand imbalance many factors also affect the price of gold.  Many investors worry due to the fact that gold was mired in a multi-year downturn that had to lose about $850 an ounce from its all-time high price. Throughout, gold miners were more likely to be writing off assets and cutting capital amounts than developing and expanding their mines.  Here are some factors that also affect the gold price.

Monetary arrangements

Monetary policy has the biggest effect on gold’s price.  That is controlled by the federal reserve. Opportunity-cost is one of the factors of interest rates that affect the gold’s price.  “Opportunity cost” is an idea of giving up a guaranteed gain in one investment and to gain potentially on the other investment. Federal Reserve can also move the gold market, the federal open market committee (FOMC) discusses the state of the U.S economy and monetary policy every six weeks. If the viewpoint of the FOMC implies the rate of gold can rise in the future. However, if the FOMC implies that the rate must be held steady, gold price tends to rise.

1 2 3
View single page >> |
How did you like this article? Let us know so we can better customize your reading experience.


Leave a comment to automatically be entered into our contest to win a free Echo Show.