The fifty year gold chart clearly indicates that the price of gold has shown sharp spikes in specific periods and sharp falls during other times. So what are the factors that have typically driven the international price of gold? Here are a few of them…

Between 1971 and 1980, gold prices were up nearly 20 times. This was the period marked by global geopolitical unrest. There was the breakdown of the gold standard in 1971, followed by the Arab Oil Embargo in 1973, the Israel War, Russia’s invasion of Afghanistan and the Iran-Iraq war. This political unrest resulted in investors preferring the safety of gold over financial instruments. Political unrest has been one of the key drivers of gold prices.

Between 1980 and 1999 when the US and other world economies got back into the growth path, the gold lost over 60% and actually bottomed out around 1999. The second trigger has been that gold has normally moved inversely with solid GDP growth.

Between 1999 and 2007, the gold prices nearly doubled and that can be largely explained by a distinct slowdown in the US economy. Markets were getting jittery as the worries over the sub-prime crisis were beginning to build up. However, emerging markets were still outperforming and hence the rise in gold price was largely subdued.

The period from 2007 to 2011 marked a 3-fold rise in the price of gold as the Lehman crisis raised serious questions about financial investments and investors started aggressively stocking up on gold as a safe-haven option. Most central banks also started issuing currency aggressively leading to debasing of currency values. That is a typical situation when gold emerges as an alternate currency.

Post 2011, growth has gradually returned to the US and other economies. During this period the price of gold has again lost nearly 40%. A lot will now depend on how Donald Trump’s policies will pan out. If his focus is on tax cuts and infrastructure spending, then we may again see gold prices slipping.

China and India are the two major sources of gold demand, especially in terms of jewellery demand. While they do not create volatility in gold prices, 2016 saw gold prices depressed largely because Indian gold demand was at its lowest as per the World Gold Council.