Why Gold Prices Fluctuate?

This is the first post in the learner’s series. A simple question that we will answer through this post is, “Why do gold prices fluctuate?”.

While I am writing this article, the Gold price stands at $1238 per ounce (1 ounce = 28.35 grams). This fluctuate everyday, and the gold prices have gone significantly up in the past few months.

Like all other investments and commodities, gold prices also fluctuate everyday and are driven by the supply and demand. Some of the important factors affecting gold prices are listed below:

1. High inflation: When the economy exhibits high inflation, people prefer to invest in commodities, especially Gold. This demand is driven by the fact that in the times of high inflation, stock markets don’t do well and Gold becomes a safer option.

2. US Dollar: When the US dollar declines, the demand for gold increases. Most investors think that gold is a good hedge against declining dollar.

3. Low interest rates: If the real interest rates are low, then the returns on bonds, equities and real estate will not adequately compensate for the risk and inflation. Therefore, people will prefer to invest in gold.

Apart from these factors, the gold prices are also affected by human sentiment, the fear of the currency becoming worthless because of a national crisis, demand of jewelery, etc.

What do you think about factors affecting gold prices? Please leave a comment with your opinion.

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4 Responses to “Why Gold Prices Fluctuate?”

  1. t.p August 9, 2011 at 2:48 am #

    A bit i have understood bt one thing i wanna knw ,hw change in price of dollar affect gold prices???

  2. Bizwrite March 20, 2013 at 7:56 am #

    Every day is two words, not one, unless used as an adjective, as in everyday events.

Trackbacks/Pingbacks

  1. Getting a Live Gold Price from Monex and Other Dealers - May 12, 2011

    [...] Gold is a very stable and trustworthy currency. While national dollar values might rise and drop drastically (and thus so will every single investment option that’s based on those dollar values), gold continues to slowly and gradually rise in value from month to month, and year to year. While this is true, it does flutter up and down in tiny increments all the time. The reason for this is that every sale and refinement of gold affects the global gold market in a tiny way. The end result being that although gold is a stable currency, it is always in a small degree of price fluctuation. [...]

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