Gold IRA Companies Explain Factors That Drive Gold Price

From time immemorial, gold has been a symbol of value. Because of this precious metal, wars were fought, overseas countries were conquered, and people moved to the other side of the world. Over time, people realized that its significance was much greater than making jewelry. It became a means of payment but also a way to preserve or increase wealth.

More on the history of gold can be found here:

This element has been used for various purposes, and its value has changed throughout history. In the last few years, there has been a steady rise in prices. The reason for this may be that the amount of ore is declining globally. However, it will be many more years before those stocks disappear. The list of factors that can affect the price of this precious metal is long, but there are a few most important ones.

Supply and Demand

Gold is one of those things that people buy when they believe there is an opportunity for appreciation. So it’s always on demand. This precious material is not just a saving method but can be used in many different ways – it can be a gift, sign of attention, raw material, drug substance, cosmetic or culinary ingredient, and many more.

Fine gold ingots

The market value of precious metals reflects changes in the status of the supply and demand. Besides individual and corporative investors, central banks actively influence the price of gold by buying and selling it on stock exchanges. That shows how vital this metal is for maintaining economic stability in the long run.

Global Economy

Events in countries whose populations traditionally respect gold (like countries of the Far and the Middle East) also affect the exchange rate of this element. Some of the world’s largest economies rely on stocks of precious metals as a source of financial stability.

If there are economic shocks or geopolitical turmoil in these parts of the world, the global market will feel those hits. In the event of war or the threat of armed conflict, the price of gold goes up. States will sell off their reserves due to the need for money. People face financial uncertainty, so they invest in this precious metal as a safe haven.

Monetary Policy

The gold price is affected by the perception of the overall monetary policy of one country. When the present is bright (low unemployment, industry development, GDP growth, inflation under control), it keeps the price down. But if any of these parameters show negative trends, most precious metals become expensive.

Stock chart with stacked coins

Investors see the possibility of economic expansion and invest in gold. It’s an excellent chance for individual buyers, too, if they think of placing their side money in precious metals or having a precious metal IRA. So when the rainy days come, they will have their funds secured in the forms of coins, bars, bullions, etc.

The amount of gold you could buy today for a certain amount of money is the same as it was four decades ago. It means that the value of the money you would get from selling your bullions or coins didn’t change much for decades. You could only earn some extra profit.

Inflation Rate

Gold is a commodity, so its value may be lower or higher due to global market developments at certain times. But the inflation that devalues money doesn’t have a direct impact on the price of this precious metal. Moreover, if that happens, gold gains in value as the demand for it grows.

When the central banks boost the monetary supply, that usually increases the gold price. Due to the increased inflation rate, investors resort to this precious metal to preserve the value of assets. In case of a long period of devaluation (money value drop), precious metals can serve as long-term hedging.

The increased amount of currency in circulation reduces the available supply of the metal. On the contrary, when the central banks reduce the monetary supply, this leads to a fall in gold value. That’s because the metal’s market value is tied to the current account balance.

Interest Rates

Interest rates are directly linked to the representation of inflation in a country. When more money is in circulation, central banks raise reference interest rates, thus encouraging savings and time deposits for a certain period of time. Some people think of it as a better and safer investment than buying precious metals. So, the demand for them drops.

Small business planning

In a sluggish economy, interest rates can fall very quickly. Those states don’t have proper financial instruments to preserve good parameters, and that manifests in banks. They bring down profits on savings and raise interest rates on loans. Before deciding on your retirement plan, check sources like for guidelines on finding a reputable IRA company.

It often forces people to take their deposits and turn them into gold (at least a part of their savings). Logically, its price will go up. Investors who purchase gold assets when interest rates are high tend to draw on their commodity reserves. They can then sell when the prices go up. If they wait for a favorable moment, that’s a plain profit for them.

No one knows how much gold has been excavated to date and how much is still in nature. But it’s well known that this precious metal still exists enough to be a way to invest money for the future.

This article is for information and educational purposes only and does not form a recommendation to invest or otherwise. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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