Money Max

Gold is a commodity that usually increases and therefore attracts a lot of investors and before you intend to invest in gold, one must know the factors that influence the increase and decrease of gold prices in the market.

Instability of the world

Firstly, the price of gold relies a lot on the instability of the world such as natural disasters, financial crisis and political situations. Investors would usually invest in gold once their confidence in the common stock market such as stocks and bonds is lost. They would just sell their shares and start investing in gold as a way of protecting their assets especially at uncertain times. Once the demand of buying gold increases, naturally the price of gold increases as well.

Fluctuations of currency

Secondly, gold price is also influenced by the fluctuations of currency. When a currency starts to fluctuate, investors would turn to gold as a safe investment to ensure that their assets remain until the currency stabilizes.

Inflation

Thirdly, inflation is another cause for the increase and decrease of gold prices. The price of gold reflects inflation where the higher the rates of inflation, the price of gold increases directly proportional to it. But the opposite sometimes does not necessarily decreases the price of gold.

Oil prices

Fourthly, oil prices also influences the gold prices. When the price of oil goes up, it causes an indirect inflation increment which naturally increases the price of gold as well. If a country that is abundant in oil is politically not stable, both oil price and gold price will increase. Another scenario would be if the oil abundant country decides to go against the currency and have the oil being bought with gold will cause the price of gold to rocket.

Hoarding and disposing

Fifthly, another reason the price of gold goes up and down is due to the hoarding and disposing of the metal commodity. One must remember that the amount of gold in the world is limited and if an investor decides to buy a big amount of gold and hoard it, the decrease of supply would increase the price of the commodity. While on the other hand, if the investor decides to dispose all of his gold shares, the increase of amount in gold would decrease the value of gold.

Bonds

Last but not least, the price of the gold commodity relies a lot on bonds as well.  But this goes hand in hand with inflation where when inflation increases, the prices of bonds decreases. So, investors that have a portfolio filled with a lot of bonds would start to turn to gold as a strategy to prevent losses. In a way, when the price of bonds changes at 1%, the price of gold would change 10% the opposite direction of the movement change in the bonds. Although bonds need not necessarily causes the price of gold to change but the bond market changes allows an investor to predict the increase and decrease of the gold commodity.