What Factors Influence Gold Rates?

As you may know, determining the rate of gold is not as straightforward as other assets. There are four main industries that deal in gold including mining, exploration or development, recyclers, and consumers. Other than that, the three types of consumers include jewelry producers, the industrial sector, and investors.

Gold rates image 499499

Gold is a precious metal that many central banks and individuals purchase and sell. Their ability to measure gold price predictions means this is a profitable commodity to trade. We have been investing in gold for thousands of years.

The price of gold is determined on a daily basis depending on the prevailing market conditions. To make the price stable, the supply and demand of gold are controlled in a systematic way. If the price of gold is low you can get gold jewelry more cheaply. Conversely, when the prices rise, so do the prices of jewelry items.

In case you did not already know, the price of gold is set daily at 10:30 GMT and 3:30 pm GMT in US dollars. The fixing takes place at the London Bullion Market Association.

Factors Influencing Gold Rates

There are many factors that influence the rate of gold. The main factors include:

  1. The cost and the demand for other items in the market.
  2. Global and US inflation, which is influenced by the increasing or decreasing supply of money.
  3. Central Bank activities including gold purchases, printing, and sales.
  4. Interest rates prevailing in the US in comparison to wages and inflation.
  5. Twin deficits resulting from growth imbalances and trade against the US.
  6. Use of demand or inventory or production formula in the form of demand and supply.

So, these are the main drivers to determine the value of gold. If you want to buy some gold assets, it is important that you first check out the gold rate, i.e., the price of gold, for that given day.

Types Of Gold Prices

There are basically two types of gold prices. Commodity traders have these prices at their fingertips all the time. The two types of prices include:

  1. Futures price

Participants in a futures contract agree to complete the transaction on a given date of settlement – this date is a specific day in the future. This is known as the futures price of gold.

  1. Spot price

By spot price, we mean the current market rate of the precious metal. In other words, the price at which the gold is sold or bought for immediate delivery and payment. In the world of trading, spot usually means now.

What are the sources of pricing?

The spot prices of gold and many other commodities are sourced at:

  1. OTC markets

OTC market is not listed in an official exchange. The letters OTC stand for over the counter. Participants are known to trade over fax or phone rather than at a formal location.

  1. Bullion traders and large banks

Both banks and bullion traders purchase and sell large volumes of gold for their clients. They work mainly on gold spot prices.

We hope this article has given you a better understand of how the gold market works. Other precious metals such as silver and platinum are also priced and traded in similar ways.

Interesting Related Article: “How To Check The Authenticity Of Gold And Silver