Therefore, gold prices may be affected by the basic theory of supply and demand; as demand for consumer goods such as jewelry and electronics increases, the cost of gold may increase. It is common for gold prices to be negatively correlated with the value of the currency and, more specifically, with the US dollar. What this means is that when the value of the dollar is high, the price of gold remains relatively flat. However, it will become more expensive in other countries where the value of their currency has fallen.
This weakening in demand further lowers the price of gold in the US. UU. Although officially gold fixing is used to decide contracts between members of the London bullion market, it is unofficially recognized as the reference point used to set the price of gold around the world. The gold market narrative has been driven by the contrasting effects of persistently high inflation and rising interest rates by central banks in response.
The wedding season in India is traditionally in October and that is usually the time of year when there is the highest demand for gold. At a time when foreign exchange reserves are large and the economy is moving at a good pace, the central bank will want to reduce the amount of gold it holds. This may be a point that is often overlooked, but the simple economics of supply and demand can also influence the physical prices of gold. However, if people in these countries don't have the disposable income to spend, this will affect the amount they buy and, therefore, the price of gold.
This is why quantitative easing programs that caused the money supply to expand rapidly were considered positive for physical gold prices. With that said, let's take a look at the seven most common factors that influence physical gold prices. This meant that at any time you could take your paper currency to a bank and exchange its value for physical gold. Potentially, if current gold reserves were sold, downward pressure on their price could cause gold to flood the market and push prices down.
But when it comes to a commodity that maintains its value over the long term and on a consistent basis, it's hard to argue against gold. Erb and Harvey compared the salary of Roman soldiers 2000 years ago with what a modern soldier would receive, based on how much those salaries would be in gold. China, Australia, Russia, the United States, Canada and Indonesia are the countries that produce most of the world's gold. The World Gold Council, the market development organization for the gold industry, recently opined that the commodity will face two key obstacles.