Many factors influence the market price of gold, including the value of the dollar, demand and supply, actions of mining companies and central banks. If you are an investor in gold, you need to watch on prices carefully because they often fluctuate.
The demand and supply of gold are powerful drivers of its market prices. Noting that gold is a strong jewelry, as well as an important industrial raw material, its demand continues to rise even as the supply is finite. If the market goes up, as is the case most times, the prices hike. Conversely, an increase in supply, with a more or less constant demand, decreases the market price of gold.
The market price of gold is often inversely related to the strength of the United States dollar. If the dollar gains value, investors tend to buy and sell the currency, decreasing the demand and prices for gold. People are more likely to invest in gold if the dollar loses value, according to American Bankers Association. In response, the demand goes high and so do the prices.
Mining bodies and central banks hold large reserves of gold. If anything, these bodies shift their selling and buying actions to favor the dollar from losing strength. Such unpredictable actions fluctuate the market price of gold.