Factors Affecting Gold Price

2.  Factors That Affect Gold Price.
 Global Gold Market Value.
 Gold News & Analysis.
 Gold Technical & Fundamental Overview.
 Gold Price & Chart

3.  According to a report by the World Gold Council,
annual data from 1990 to 2015, revealed two
significant factors affecting gold consumer demand
(jewellery, and bar and coin combined) over the long-
term.
 "All else being equal, gold demand is driven firstly
by, income i.e. gold demand is seen to rise with
income levels.
 For a 1 percent increase in income per capita gold
demand rises by 1 percent and secondly, gold price
level i.e. higher prices deter gold purchases.
 For a 1 percent increase in prices, gold demand falls

4.  When economic growth is stalled due to a crisis, it usually affects equity
markets, global trade, and the financial ecosystem as a whole due to
undeterminable fluctuations in demand and supply, creating market
volatility.
 Uncertainties force investors to diversify their investment portfolios as
they head towards securing their finances through safer options.
 In such scenarios, people turn to asset classes for investment, wherein
gold becomes the top choice, generating an increase in demand and a
resultant increase in its price.
 Similarly, in the advent of the current COVID-19 crisis which has
wreaked economic havoc across the globe, the price of gold even in
our country has increased by more than 11 percent in April alone.

5.  To counter economic meltdowns, governments often declare multi-
billion dollar stimulus packages to pump liquidity into the economy.
 This creates an environment that facilitates additional spending by the
citizens, however, many tend to secure their finances through
investments in gold.
 Evidence from the previous two decades indicates how the subsequent
inflations after global economic crises have led to price increases in
gold.
 Furthermore, the belief that gold markets can adjust to inflationary
trends stands true, because fearful investors often look to hedge the
after-effects of inflation through investments in gold exchange-traded
funds (ETFs), sovereign bonds, and gold asset classes in general.

6.  Demand for gold in India is interwoven with culture,
tradition, the desire for beauty and the desire for
financial protection.
 According to a study by World Gold Council
commissioned by the World Gold Council and
Federation of Indian Chambers of Commerce and
Industry (FICCI), Indian consumers view gold as
both an investment and an adornment.
 When asked why they bought gold, almost 77 per
cent of respondents cited safety of investment as a
factor, while just over half cited adornment as a
rationale behind their purchase of gold.

7.  People want to invest or buy gold to protect
themselves from volatility and uncertainty.
 The preference for physical assets makes
Indian households view gold as a safe haven,
an asset to buy when other assets are losing
value.
 Underlining gold's attraction as an asset for
good times and bad, most investors would buy
gold whether the domestic economy was
growing or in recession.

8.  When inflation rises, the value of currency goes
down and therefore people tend to hold money in
the form of gold.
 Therefore, in times when inflation remains high over
a longer period, gold becomes a tool to hedge
against inflationary conditions. This pushes gold
prices higher in the inflationary period.

9.  According to some industry experts, under
normal circumstances, there is a negative
relationship between gold and interest rates.
 Rising yield indicates an expectation of strong
economy. Strong economy gives rise to inflation
and gold is used as a hedge against inflation.
 Also, when rates rise, investors flock to fixed-
income investments that yield a fixed return
unlike gold which does not carry any such
return.
 So, demand takes a back seat with prices
remaining flat.

10.  Rural demand plays an important role in the
demand for gold in the country which
depends primarily on monsoons.
 Therefore, monsoon plays a big part in gold
consumption because if the crop is good,
then farmers buy gold from their earnings to
create assets.
 On the contrary, if there is deficient
monsoon, farmers tend to sell gold to
generate funds.

11.  It is believed by some economists that gold is a highly
effective portfolio diversifier due to its low to negative
correlation with all major asset classes.
 Still, as a rule, gold shows no statistically significant
correlation with mainstream asset classes.
 However, some suggests that there is evidence that when
equities are under stress, in other words when shares are
falling rapidly in value, an inverse correlation can develop
between gold and equities
 Gold protects one's portfolio from volatility because the
factors, both at the macro-economic and micro-economic
fronts that affect the returns from most asset classes do not
significantly influence the price of gold.

12.  Gold usually does well during geopolitical
turmoil and the current crisis over Korea's
nuclear capability has boosted the prospects of
the yellow metal.
 Crises such as wars, which have a negative
impact on prices of most asset classes, have a
positive impact on gold prices since the demand
for gold goes up as a safe haven for parking
funds.

13.  Under normal circumstances, gold and dollar share an
inverse relationship.
 Since international gold is dollar denominated, any
weakness in the dollar pushes up gold prices and vice
versa.
 The inverse relationship is because firstly, a falling
dollar increases the value of currencies of other
countries.
 This increases the demand for commodities including
gold.
 It also increases the prices.
 And secondly, when the US dollar starts to lose its
value, investors look for alternative investment sources

14.  According to some estimates, global demand
for gold is 1,000 tonnes more than the
supply.
 With no new mining capacity coming
through, most of the gold is being recycled.
 Therefore, less of supply is another factor for
changes in gold rates.
 Inflationary pressures in the world economy
are positive drivers of gold prices.

16.  XAU/USD faces rejection once again below 100-DMA, US data eyed.
 Gold holds the higher ground amid recent weakness in Treasury
yields, DXY.
 XAU/USD’s daily chart shows a range breakout is likely on the US
NFP release.
 Softer demand from central banks and jewellery to cap any upside –
HSBC
 XAU/USD to confirm bullish bias on a move beyond $1,800.
Source:
 Gold Forecast, News and Analysis - FXStreet