Numerous factors influence the value of a gram of gold, including international conflicts, inflation and fluctuations in interest rates. All of these factors affect the demand for this precious metal. When demand rises, the value per gram increases, and during periods of less demand, the value declines.
During an international crisis, individuals either gain or lose confidence in the stability of the government. When confidence is high, investors tend to move funds away from gold, which decreases the demand. Low confidence leads to an increase in gold investments, raising the demand.
Interest rate changes also affect the value of gold. Higher interest rates lead investors to sell gold and buy into interest-earning stocks. The supply of gold increases, and its value declines. Decreased interest rates lead to increased gold investments, lowering the supply and raising the value of each gram.
Another influential factor is production cost. With a limited amount of gold produced each year, miners affect the value by setting their initial sale prices. When the cost to mine and produce gold increases, miners make up for their larger expenditures by selling the metal at elevated prices. These higher prices get passed on to investors and consumers, causing the value of gold to increase.