Gold is one of the hottest commodities closely watched by investors and even short-term traders. Gold price can tell so much about the economy of the US and other major economies, and still these economies heavily effect gold prices with their every-day news and financial events.
As you have probably heard, or know by heart, gold has been always looked at as the safe haven for the US dollar. You don’t have to wonder why when you remember that gold was originally the number 1 trusted currency before banknote came into existance.
With that said, there are a few factors that drive the price of gold, they are:
1- Interest Rates:
During non-troubling and stable time, people always liked to save and invest in a good yielding assets, they stocked up either gold or cash. Whichever is securing highing yeild.
Higher interest rate means that you are getting better outcome of your dollar savings, banks pay you better to keep your dollars there and they also charge you more when you borrow from them, thus, the dollar becomes more valuable than gold.
When the interest rates are low, people tend to go to a more fruitful investment; and gold historically played that role. In that case, gold prices go up against the US dollar.
2- Employment Related News:
Employment is a huge driver of economic growth. the more people are employed, the better the economy is, the stronger the currency.
And because gold is a historic rival to the printed currency, the higher the dollar is, the lower gold price is, and the opposite is true.
The average citizen tends to hate inflation of any rate. Inflation means your dollar can but less products than it could before. Prices soars and dollar becomes of less value.
In that case, people like to hedge a against inflation with gold, which price tends to rise in response to the weakening dollar.
Asian big economies, specially China and Iaxndia have their share in deciding the direction of gold prices.
Holidays like Diwali in India can shake the market with excessive demand. At the end of the day, gold is just a commodity and it’s outlined by simple concept of supply and demand.
However, it’s also well known that the gold market might just go ahead and ignore all those events altogether. In a recent conversation I had with an Indian business man right around Diwali, he wasn’t optimistic about gold purchases this time due to the Indian government’s decision to recall the 500 and 1000-rupee banknote.
5. The chart:
Even though gold as well as other commodities are driven by supply and demand, technical analysis can’t be ignored.
Gold is a busy and volatile trading instrument. It’s easy to find candlestick and chart patterns.
The list doesn’t stop here. There are many more factors that move gold price. Put a comment or inbox me if you’d like to point out your favorite event that you often wait for to guess the next move in our beloved gold price.