Gold is a traditional investment, before anyone knew about fixed deposits, stocks, and mutual funds, buying gold bullion was beneficial and one of the most popular investment expert strategies.
Precious metals like gold are now sought after for investment motives and use in electrical and medicinal gadgets. The price of gold bullion (should be at least 99.5% pure gold) was around $1,790.90 per ounce in September 2021, down from over $300 in September 2020.
Apart from prices, always check for the provider’s certifications when buying gold bullion. All IPM gold bullion bars, coins, and products are 100% authentic.
Following are the factors that affect gold bullion prices across the world:
Demand and Supply
Like any other investment commodity, gold bullion price is determined by demand and supply. Gold, unlike oil, is not consumable. All the gold mined is still available, and the annual gold production is modest. As a result, the price of gold rises whenever there’s an increase in demand.
Inflation Rate
Inflation, or rising costs of goods and services, can also affect gold bullion prices. Increasing inflation tends to boost gold prices, whereas decreasing inflation or deflation tends to depress them.
Inflation nearly always indicates economic expansion. When the economy expands, the Federal Reserve often increases the money supply. Expanding the money supply devalues existing currency, making it more expensive to buy assets like gold.
This is why quantitative easing measures that rapidly expand monetary supply are perceived as favourable for gold prices.
International Currency Shifts
Currency movements, specifically the US dollar, play a major role in the price shifts, because gold is priced in USD.
A weaker dollar tends to boost gold prices because other currencies and commodities gain value as the dollar grows weaker. Conversely, when the dollar strengthens, the gold prices come down.
A booming US economy leads to a stronger dollar, meaning gold prices are dragged down. Thus, gold prices and the US dollar are inversely proportional.
World Jewellery Market
According to the World Gold Council, jewellery covers over half of the gold demand in 2019. India, China, and the US are major purchasers. Around only 7.5% of the global gold consumption is ascribed to technological and industrial purposes. Jewellery supply and demand can affect gold bullion prices. When demand for consumer products rises, so does gold’s price.
Interest Rates
Gold prices and interest rates also have an inverse relation. People lose money when interest rates fall. This increases demand and prices. When interest rates rise, consumers sell gold and invest in high-interest deposits, thus reducing the demand for, and, eventually, the price of gold bullion.
ETFs
These aren’t crucial market-movers, but they’re still worth mentioning. ETFs are low-cost basket funds that allow you to distribute their risks among different assets. The buying and selling of gold ETFs might alter the price of bullions.
Final Tip
There are also some uncertainties that can influence the price of gold bullion in many ways, but political uncertainty and instability is arguably the finest example. In short, the stock market investing craves certainty and often opposes gold pricing.
Before buying IPM gold bullion bars or coins, check the prices and discounts offered by the seller.
