๐Ÿค” How is the price of gold determined?

Published by Mikael Gustavsson — 07-30-2022 08:07:13 AM


The only commodity that is always in demand is gold. It will never be ignored ๐ŸŒŸ Jewelry is always very popular and therefore the demand for it will never fall. As you can observe, the price of gold is never static. It is constantly changing๐Ÿ’ตSo what determines the price of gold and what factors does it depend on? It's time to talk about it โคต๏ธ


The cost of an ounce is formed based on many factors๐Ÿ“ŠIn addition to economic factors, social factors are also taken into account. The most significant of them are:


๐Ÿ’ฐ Dollar exchange rate


This is another factor that can determine the future value of the precious metal. When the dollar loses its value, the price of a gold ounce rises sharply๐ŸทAnd the other way around, when the dollar strengthens against the euro ๐Ÿ’ถ You can easily follow the formation of prices for the yellow metal in recent years, when the world currency has risen in price noticeably๐Ÿ”ฅ


๐Ÿ˜ทโ˜„๏ธNatural disasters and epidemics.


During such incidents, gold production decreases and the price of gold rises ๐Ÿ“ˆ Moreover, during a pandemic or natural disaster, gold is the most protected asset that gives peace of mind. A good example of that is the growing interest in investing in gold in 2020 during the COVID-19 pandemic๐Ÿฆ 


Similarly, like natural disasters, the price of gold is affected by political instability, wars, and economic crises ๐Ÿช– In conditions of economic volatility, people prefer to invest in classic investment instruments that will not depreciate in an instant๐Ÿ“ฏAccordingly, gold is in high demand and rising in price.


๐Ÿ’ผ Investor Behavior


When buying gold products or gold-bearing commodities, there is a huge demand for this precious metal๐Ÿ˜ฑAs everyone knows from school program, the greater the demand for a certain thing, the more expensive it is ๐Ÿ’ธ The reasons for buying up are very diverse. It can be financial instability or improvement in the quality of life in a certain area. Having large income, people begin to buy more jewelry๐Ÿ“ฟ, and this increases demand. 


When there is a prediction for an imminent increase in the cost of an ounce, gold miners also do not sit idly by. They immediately sell all the remaining quantities of the yellow metal, and it all enters the world market ๐Ÿคฉ This can be explained by the desire to get as much profit as possible from sales, especially since technological progress can significantly reduce the cost of gold miningโ› 


๐Ÿ™Œ Volumes of gold mining in the context of different countries.


The more gold is mined, the cheaper it is๐Ÿ’๐ŸปUnfortunately, even with improved technology, gold mining around the world is not increasing. On the contrary, it tends to decrease. This, in turn, leads to a price increase of the yellow metal ๐Ÿ†


All of these factors play a role in both the global price of gold and price setting in local government markets๐Ÿ“‰Therefore, within a single country, the gold rate may differ from the London official rate, but the trends towards its growth or decline throughout the world remain the same ๐Ÿง๐Ÿผโ€โ™€๏ธ


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About Mikael Gustavsson

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