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7 Factors That Affect Gold Price

Gold is an old and important metal that resembles how much jewelry can be evergreen and aesthetic. Gold is one of the most favored and safe forms of investment. The value of gold is known to everyone. The gold prices can create an impact on your investments as well. This is why you should know about the gold price factors. What is the price of gold, and what affects the gold price? There are a lot of factors which may affect the value of gold. In this article, we will discuss all the elements which affect the gold prices.

Why are Gold Prices Rising?

Many investors are concerned with the sudden increase in gold prices. Why are gold prices rising? Is this normal? Should you invest in gold at such high prices? Or is this a bubble that will burst soon? To help you find answers to such questions, we have listed the factors that may have contributed to the increase in gold rates in recent weeks.

All the Factors which can affect your gold price – 

gold price

Economic Issues – 

The dramatic changes in the economy can affect everything. But right now, in the situation of COVID-19 due to lockdown, there has been a downfall in the economy. The fluctuation in demand and supply has made it chaotic for investors and the global trade market. Investors usually invest in gold more than currency because its value generally increases over time and inflation. When inflation is high, the demand for gold will be increased as well, which happened in the situation of COVID-19 – people started turning an asset into an investment. 

Since gold has been the first choice for people always, the increase in demand affected the gold price. This is one of the first reasons for the increased price of gold.

Global changes – 

The global market changes can be beneficial for both the jewelers and the sellers, provided they know when to trade in gold. 

In between all political chaos and financial market changes, the price of gold changes and it’s demand fluctuates. If there is a rise in demand for gold, its price will undoubtedly fall. This is good news for gold investors if they want to earn some profit, but bad news for sellers who will suffer a loss.  

On the other hand, during a global situation changes like a pandemic where there has been an economic downfall which has affected the cost of every single product. It has also affected the price of gold. During the pandemic, the gold prices increased. Likewise, any changes in the economy or global trade can make a major impact on the price of gold as well. As a result, sellers need to be careful and consider the global market and current gold prices while making a sale.

Even the countries, which are the top international importer of gold –  their gold price can be affected if there have been any recent changes by the government of their country. In such cases, the value of the currency and internal political conflicts can impact gold prices. Thus, keeping in mind all these factors that affect gold prices, sellers must make informed decisions while trading their gold. 


Inflation – 

How inflation plays a role in the effect of gold price? When inflation rates increase, the value of currency decreases. When any country faces an economic meltdown, the government usually declares multi-billion-dollar to incite the packages to boost the liquidity in the economy.

Inflation turns out to be a good option if you are trading or investing in gold. In this situation, many people want to secure their finances which is why they start investing in gold or gold jewelry.  Because, even in the extended period of inflation – gold is the only investment that is not affected by any of it. When we observe over a long period of time, the gold value has always been increasing. Though fluctuations in gold prices can happen over a short duration. This gold price factor helps you a lot because the last two decades are the perfect example where inflation was the reason behind the increase in the gold price.

Population and Demographics – 

In many countries, Jewelry shops or markets are the places where people visit more often in festivals or weddings. For Example, fifty percent of the population in India is under the age of forty, and traditionally, it is expected that they will invest in gold. Gold jewelry or gold in general is a popular form of investment. It is a ritualistic part of many places in our country. 

Also, in some other parts of the same country- the popularity of gold is high because it shows tradition and cultural values which is why the demand is high. This gold price factor can help you a lot in understanding how you can invest your money in jewelry. In the western part, people buy gold for weddings mostly. So, the population of a country and demographics plays a vital role in jewelry and gold. As you can realize how much inseparable gold is from the traditions of India.

Interest Rates – 

A significant factor when it comes to an increase in the gold price and why you should invest in gold. When interest rates fall, and people do not get the right returns – they tend to break their deposits and start buying gold jewelry and start investing in it. In this situation, the demand for gold increases so the price of gold. 

The fall of interest rates is very profitable for business and the same when the rate of interest rises, people sell gold and start investing in their deposit to get more interest. The part of demand and price revolves around interest rates as well. The reason why economic changes and fluctuation in demand can affect your gold price- this is one of the gold price factors to remember.

 Exchange rate – 

The impact of lockdown also created a massive effect on the currencies. The gold price today is way too different than how it was before lockdown. Some currencies have fallen sharply during this lockdown. The exchange rate plays a vital role in the investment, and when the currency rate is down already, it is hard to see what will impact the gold price. 

There is fluctuation in the quality of gold and the fact which affected it is the exchange rate. The exchange rates can play a vital role in gold investment which makes it one of the vital gold price factors. In a way, we can say that investing in gold is a good option as selling it gives good returns at any point in time.

Rising Income – 

The economic growth or fall both affects the gold price. The increase in income in the middle-class groups impacted their purchasing power. In the countries, where people see the worth and where gold is the status symbol, something which resembles tradition and makes a status at weddings – the demand becomes high. 

The Rise in income created a massive impact on the Rise of price and market, which is why it is one of the gold price factors that play a vital role in the factor which can affect income.

So… Should you invest in gold now??

While the recent news on gold prices indicate a high demand for the yellow metal, some analysts are also predicting gold prices to touch S$1,184 per 10 grams over the next two years. They believe that factors like low rates of interest, high liquidity, and economic impact of the lockdowns happening due to COVID-19, will have a lasting impact on the markets and so, will dictate gold price trends. They also expect the demand for gold to keep increasing unless a vaccine is introduced or the number of cases is brought under control.

2020 and 2021 might see gold as a key element of most investment portfolios. Even if the vaccine is introduced, the psychological impact of the pandemic might keep investors interested in the yellow metal for a long time. Gold will regain its position as a strategic asset, and many investors will try to benefit from the positive price momentum.

Should you invest in gold now? The answer depends on how you perceive the market. If you think that interest rates will continue to be low for a long time and businesses will take months before some sort of recovery, then gold as an investment can be a wise choice. On the other hand, if you believe that the economy will recover faster, then you might want to look at other investment avenues. It also depends if gold as an asset class fits in your investment profile.

Conclusion – 

In any country or tradition – gold plays an essential part in everyone’s life. It just not only shows the ceremony but it is something which you can keep for a very long time, and if you want to make money out of it, it is also an excellent idea. When you start investing in gold jewelry or gold in general, you will realize how safe and reliable it is. The yellow metal is not only about how you wear it but how you use your jewelry to invest as well. 

Jewelry plays a vital role in our life, and we know how they affect price can affect our investment as well. These were some factors which you should know and If you are thinking of buying or selling your gold or if you want to invest out of it – you can use this article so that you can get more ideas about it.



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