The price of gold is affected by the entire global economy. Its price is affected by supply and demand, just like any other product on the market today. Central banks affect the price of gold when both buying and selling it, since they do so in large quantities. Gold values increase when people buy gold in an effort to maintain the value of their savings.
The value of the US dollar affects gold prices worldwide. When the dollar is strong, gold prices are low, but when the US economy declines, the dollar weakens, and gold prices increase. During the recent recession, many people bought gold bullion for investing and secreting away for safekeeping. When the price of gold is low, the economy is healthy. That’s because investors have left gold for other, potentially more lucrative investments such as stocks, bonds, or real estate.
In the past 5 years, there has been a increase in the cost of gold mining because of political conflicts, strikes by gold miners, and other factors. Also, since the global population is constantly rising, so is the demand for gold, putting a strain on its supply.
Ever wonder why gold prices are different in other countries? This happens because businesses in a certain country agree to post a certain price for gold so that global buyers can manipulate the market, decreasing or increasing the price for gold as they see fit.
The price of gold is always changing, and it’s a rather complicated subject to understand. There are plenty of resources available, including this fascinating article by Forbes: http://www.forbes.com/sites/investor/2013/08/06/whats-moving-the-price-of-gold/, this one from About News: http://useconomy.about.com/od/commoditiesmarketfaq/tp/gold_prices.htm, as well as this piece from Investopedia: http://www.investopedia.com/financial-edge/0311/what-drives-the-price-of-gold.aspx
Dig in!
