Q:

Why does the price of gold change so often?

A:

Quick Answer

A number of underlying factors support gold price fluctuation, but the primary reason for constant changes is that gold and gold derivatives are traded daily on several exchanges, according to Fink's Jewelers. Investors base buy and sell decisions on relative supply and demand factors of gold.

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Why does the price of gold change so often?
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Full Answer

One of the most significant catalysts in gold price changes is changes in the value of the U.S. dollar, according to Investopedia. When the dollar gains strength, enthusiasm for gold investing tends to decline. When the dollar loses value, people tend to invest more heavily in gold, leading to higher prices. These investment patterns relate to the fact that the U.S. Central Bank holds much of its financial reserves in gold. Gold is also viewed as a safe place to invest during periods of economic uncertainty.

The emergence or escalation of world gold supplies typically leads to falling gold prices because of the relative increase of supply versus demand. In contrast, drying up of gold supplies contributes to higher gold prices, according to Investopedia. It costs more money to mine gold, which means the costs are passed on to buyers. Traders view this as a reason to buy. The overall global demand for gold-inclusive jewelry also impacts the supply-demand relationship and, thus, interest in gold investing.

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