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What are the factors affecting the price of gold?

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Quick Answer

Several factors affect the price of gold, including the current valuation of currency and the strength of the economy, as explained by Scottsdale Bullion and Coin. The principle of supply and demand also influences the price individuals pay for this precious metal.

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Full Answer

Currency valuation refers to the worth of a specific currency, such as the dollar. If investors notice that the value of a currency is dropping, they often move their investments to gold, according to Scottsdale. This is largely due to the metal's track record of retaining its worth. When investors buy more gold, the law of supply and demand raises its price.

The price of gold also fluctuates with the strength of the economy, as stated on the Scottsdale Bullion and Coin website. During times of economic recession, individuals prefer to make safe investments. Investors classify gold as a secure investment because it continues to maintain its significant value as a representation of wealth around the world. The law of supply and demand once again applies, with the price of gold increasing as investors buy more of it.

The many uses for gold also increase its demand. This precious metal can be found inside cell phones, medical devices and computers, according to Geology.com.

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