How Is the Gold Price Set

How Is the Gold Price Set

Certainly! Let’s dive into the fascinating world of gold prices and understand how they are determined…

Several economic factors significantly impact gold prices…

  • Inflation: Gold is often seen as an inflation hedge. When inflation rises, people turn to gold as a store of value, driving its price higher.
  • Interest Rates: Gold has an inverse relationship with interest rates. Rising rates make yield-bearing assets more appealing, reducing gold’s attractiveness. Conversely, lower rates can support gold prices.
  • Currency Fluctuations: The strength of the US dollar, especially, affects gold prices. A weaker dollar increases demand for gold as an alternative asset, pushing prices higher.
  • Gold prices are generally quoted in troy ounces, grams, or kilograms.
  • The primary benchmark is the London Bullion Market Association (LBMA) Gold Price. It serves as a centralized reference point for the physical gold market.

“The price of gold has recently hit a record high amid investor jitters over tensions in the Middle East and speculation that US interest rates will be cut by the summer.

Investors piled into the “safe haven” asset on Tuesday, with the spot price reaching a record $2,141.59 (about £1,685) for an ounce, beating the previous record of $2,135 in December.

Furthermore, the US Federal Reserve is increasingly expected to cut interest rates in June. Reductions in borrowing costs typically push gold higher because it does not offer any interest.

The precious metal is also used as a reliable store of value during periods of political and financial uncertainty. It has risen by more than $300 an ounce since the start of the Israel-Hamas war and some analysts believe it could break the $2,300 mark”.

Credit: Guardian Online. Here is the detailed article from The Guardian online regarding the recent surge in gold prices..,to%20its%20upward%20price%20trajectory.%E2%80%9D

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