Many significant catalysts drive the price of Gold. Here are some significant factors that lead to movement in the price of  Gold.

.1.Market and Economic conditions:- Like other precious metals, Gold is also considered a safe-haven investment. When Economic and market conditions are poor, investors tend to invest more in Gold which leads to an increase in the price of Gold.

The stock market crashed by 38.9% during the Black Monday financial crisis in 1987, Whereas the gold price increase by 5% and thereby outperforming the stocks by a 45:1 ratio. During the Iraq-Kuwait war, the stock market declined by 22.5%, whereas gold increased by 7.5% and outperformed stocks by a 31:1 ratio. During the Dotcom crash in 2001, Stocks decreased by 27%, gold prices increased by 1% outperforming stocks by 29:1 ratio. And during the financial crisis of 2008 the stock market declined by 34%, Gold prices increased by 5% outperforming stocks by a 40:1 ratio.

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2.Cultural Events:-Gold is used in various cultural events worldwide which may be from architecture to art and even weddings. For example, there is a significant increase in the price of Gold in India during the wedding seasons spanning from January to March due to an increase in demand for Gold. Gold prices also rise significantly during the auspicious occasion of Diwali in India.

3.Inflation:- The inflation rate also plays a significant role in the increase in Gold price. When the inflation rate is high, investors often invest heavily in Gold as a hedge against inflation. Investors hoped to maintain the value of their investments by owning gold which holds its value while currency loses its buying power. The price of Gold is inversely proportional to the rate of inflation.

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4.Geopolitical situation:- Unsettling or Uncertainty of the Geopolitical situation in the world may lead to an increase in the price of Gold. The currencies of many developing countries are not as flexible as the US dollar or Euro which can be traded for fair market value all over the world. As a result, Gold is a measurement of a country’s wealth. Government demand for Gold may arise during times of uncertain political or geographical conditions.

When Does the Price Increase?

When political uncertainty is there around, the gold price will shoot up. As an immediate reaction to the political turmoil, more and more people tend to invest in Gold which will lead to an increase in demand and ultimately increased price. This happened during the Eurozone crisis that had affected Europe since 2009 which wreaked havoc on the continent but the Gold hit an all-time high in 2011 at $ 1,895 per ounce. Likewise, political uncertainty and violence in the US and after Democrats gained a majority in the US senate  during January 2021

How about a decrease? If the stock and commodity markets are performing well, the price of gold will decrease. Those thinking of long term investments or a hedge or safe haven for the future could consider purchase Gold when the price is lowest

5.Value of the US Dollar:- The price of gold is inversely related to the US dollar value. A strong US dollar will certainly keep the price of Gold lower whereas a weak US dollar may drive the price of Gold higher as investors tend to buy more Gold.

THE TAKEAWAY:-  Gold investment is an ideal investment for you if:-

1. If you have tens of thousands of dollars to invest as Gold is a highly valuable asset and you should have enough money in your well-diversified investment portfolio. For example, today’s price is $1,780.00 per ounce and you should have enough money in your portfolio even to buy one or two ounces of gold bars.

2. You should invest in Gold if you want to hedge against inflation. Gold has often grown faster than the US dollar. The yellow metal provides a better hedge against inflation.

3. You should invest in Gold if you want stability in your investment portfolio as Gold is the most stable asset, unlike stocks. Gold may balance out the risks associated with other investments.

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Affiliate disclosure :- This post contains affiliate links . Clicking on the link and purchasing from the link may enable me to earn affiliate commissions from Regal Assets.com.


Published by durgasid

I am an Indian,44 years of age. I am working as a Government Servant.

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