Gold is one of the most reliable and stable assets in the market.
But that doesn’t mean that from time to time we are not going to become the victim and witnesses of the movements that gold can make.
That is why, as gold is one of the most common assets that we choose to invest in, we need to look into the things that can influence gold’s price and our trading as a result.
- Inflation.
- Supply.
- Popularity.
- Dollar.
1. Inflation.
Even though we so used to inflation being a bad thing for the equities, it is actually a good thing for the gold. With prices for everything around it sinking, it is only fair to assume that traders are going to turn to the safest asset that they can find, and most of the time it is gold. Forex traders tend to go to commodities when inflations rates balloon up, pouring millions and millions into the support of gold.
That is why even with high inflation rate gold is the thing to rely on.
2. Supply.
Is there such a thing as a gold supply? After all, it is not consumed. It is not eaten or burnt. The only thing that gold supply can do after all is grow. And that is it. But there is a factor the can decrease the presence of the gold in the market – jewelry possession. How many of us have bought a ring, a bracelet, a necklace and have never worn it? Or didn’t really wear it for months at a time? Usage like that simply takes that amount of gold off the market.
And demand for the metal is not going down with this, that is why gold is always in high demand – countries have the golden reserve in the form of bars, there are also people who prefer their gold in a solid form like that. Isn’t that sweet?
That is why there isn’t really such a thing as a stockpile of gold, that can really influence the price, but the fact that people do not really trade physical gold that often can really jump the power.
3. Popularity.
The more people invest into gold, the better it is for everyone. And I cannot say that gold suffers from the lack of popularity. At this point, with markets being so turbulent, I would not be surprised if the popularity and price for the asset would only go up. And that is exactly what we have been seeing lately.
Gold is either gaining of being surprisingly stable right now. And this behavior is consistent for the commodity. So, there you have it – we already see the effect of the trust put into the metal.
4. Dollar.
We’ve come to one of the most important factor that influences the price for gold. It is of course dollar. It is of no surprise to us, as everything in the modern markets is tied to the greenback. Every commodity, every currency, everything is measured against the American currency. And that is just the way system works.
But the connection that the greenback has with gold id truly special. There is no way that one can grow without the other being down. That is a special kind of a tango that these two are doing. And as long as dollar stays down and makes no rapid movements, gold is going to be just fine.
