2 days Ago By Pramode Mallik
With gold prices reaching a new height and the yellow metal hitting the Rs 95,000 level on Wednesday, the natural question being asked is: how the international gold price is determined? The spot gold in the international market rose 1.9% to $3,287.79 an ounce after hitting an all-time high of $3,294.
99 per ounce earlier in the session. US gold futures soared 2% to reach $3,304.20.
How did it fluctuate so quickly and which were the factors driving it? International gold prices are determined by a number of factors, including demand and supply, economic conditions, currency fluctuations, and geopolitical events. It is determined not only by market dynamics, but geostrategic factors and political equations also play important roles. Factors like inflation, US dollar strength, and interest rates also impact gold prices.
Demand and supply Like any commodity, the fundamental principle of supply and demand dictates the gold prices; when demand for gold exceeds supply, prices tend to rise, and vice versa. Interest rates As higher interest rates make gold less attractive as an instrument of investment compared to interest-bearing assets, gold prices fall. Similarly, it goes up when the gold prices go up.
The same rule applies to share market behaviours also. When the share prices go up, it makes gold less attractive, and gold becomes cheaper. Central Bank policies The gold reserve policy and the buying and selling patterns of the central bank (Reserve Bank of India) can influence the supply and demand dynamics, impacting gold prices.
Buying more gold pushes the prices up. Economic uncertainty Gold prices increase with geopolitical instability and economic downturns as the demand for gold goes up with people buying the yellow metal as a hedge against uncertainty. Geopolitical events Major political events or conflicts like the Russia-Ukraine War generally create uncertainty and increase demand for gold as people buy it as a safe haven.
Global Market trends As gold is a valuable metal, its prices are closely watched by traders and investors worldwide. So, global market sentiment can have a significant impact on pricing. A weakening in the sentiment at one point can drive the prices down worldwide.
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