What Affects Gold Prices: Find In-depth

by Francis Alukkas | 29 August 2022 | GOLD PRICE

One of the best conventional methods of saving or investing is gold. Modern investors view gold as a risk-free investment. Over the past 50 years, gold prices have risen dramatically, with the emergence of exchange-traded funds (ETFs) among the reasons contributing to the increase in the price of the world's favorite precious metal. A wide number of factors influence its per-ounce price, so individuals who are interested in purchasing the precious metal must understand how, why, and when its price is likely to fluctuate.

However, if you're thinking about investing in this precious metal, you should be aware that the value of gold depends on a number of different factors. What drives gold prices? What factors cause gold prices to rise? Continue reading to know everything about the gold rates.

What Affects Gold Prices

We list the factors that can affect the price of the gold month after month and year after year below.

Supply and Demand

Demand and supply are two of the most important elements that influence the price of any item. The same is true for gold. Every year, insufficient amounts of gold are mined. This indicates that a rise in gold demand will ultimately lead to a rise in gold prices. ETFs currently account for a considerable portion of total gold demand volume, and thus have a big impact on its per-ounce price. The price of gold, on the other hand, will almost certainly fall if it becomes oversupplied.


As previously said, gold is a popular and effective inflation hedge. Despite the fact that the value of money declines when inflation rates rise, gold is unaffected. Investors opt to invest in gold as a result in the event that inflation rates increase. Therefore, it is possible to argue that growing inflation is causing a rise in gold prices by raising demand for the gold. Also, Read: Gold Jewellery Making Charges

Interest Rates

It's interesting to note how interest rates impact gold prices. Investors typically sell their gold or gold ETFs as interest rates rise and invest in deposits instead to take advantage of the higher returns. As a result, there will be less demand for gold, which will result in a decline in the price of gold. On the other hand, when interest rates drop, investors are more likely to choose gold over deposits. In this scenario, the price of gold will rise as the demand for gold rises. As a result, it may be said that changes in interest rates are negatively related to changes in the price of gold.

Currency Changes

Exchange rates, or the cost of one currency in relation to another, can change over time and can be quite volatile at times. As the value of the dollar increases in proportion to other currencies throughout the world, the price of gold tends to decrease in US dollars.

Because gold is more expensive in other currencies, this is the situation. As the US dollar's value falls and it becomes more affordable in other currencies, gold, on the other hand, tends to rise. This is why a lot of gold investors pay close attention to currency exchange rates and the US dollar. Also, Read: 2022 Gold Price Predictions

Crude Oil Prices

On global markets, crude oil is a very volatile commodity. Gold costs more when the price of crude oil is falling. A fluctuating US currency affects both gold and crude oil. A weak currency might cause crude oil and gold prices to rise.


Within the nation, the number of imports also affects gold prices. India needs to import gold to suit its needs because it is the world's second-largest consumer of precious metals. The price of gold falls when gold becomes more accessible when the import duty is reduced.

Will Gold Rate Increase in Coming Days?

Various factors determine whether gold will keep rising. The price of the metal is influenced by central bank decisions on interest rates and inflation because higher inflation and lower interest rates both increase the cost of the metal. The same is true of exchange rates since a weak US dollar will lead to an increase in gold prices. Then there's the issue of metal supply and demand - gold mining is growing more difficult over time, which is one cause for long-term price increases.

No matter how numerous the factors influence when gold price will increase, it all comes down to the demand-supply game in the end. One of the main factors influencing the price of yellow metal is the basic demand-supply imbalance. However, a number of conditions, some of which have been discussed in the points above, may result in this mismatch.

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