InvestorQ : What are some of the major factors that actually drive the price of gold in the international markets?
Moii Chavate made post

What are some of the major factors that actually drive the price of gold in the international markets?

Answer
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Sam Eswaran answered.
1 year ago


Historically, there have been a few key factors driving the price of gold. Normally, gold and uncertainty have gone together. Whenever there is geopolitical or economic uncertainty, there is a sharp rise in the price of gold. Gold prices have been inversely related to the value of the dollar. Therefore a strong dollar index results in weak gold prices. As we saw earlier, gold becomes valuable when there is geopolitical uncertainty as investors prefer the safety of gold. Gold is normally seen as a very safe haven to park money when the overall scenario is very uncertain. We saw that during the Middle East crisis and the oil embargo in the 1970s and later post the Lehman crisis in 2008. Both these events led to a sharp bull market in gold prices. Thirdly, when currencies get debased due to too much money getting printed, gold emerges as an alternative currency. Take the 10 year period since 2008. Most central banks like the US Fed, ECB, BOE and the BOJ have been aggressively printing more currency to infuse liquidity in the markets. This has led to the intrinsic value of currency going down and getting debased. In such situations, gold is the best store of value. Interestingly, while the principal demand for gold comes from India and China, the traditional jewellery demand has rarely driven the price of gold.