What moves the price of gold?

As one of the oldest currencies on the planet, gold has become deeply embedded in the psyche of the financial world. Almost everyone has an opinion about gold, but gold itself reacts to a small number of factors that increase the price. Each of these forces is divided into a divergence that affects the impact, volume, and power of the process:

  • inflation and deflation
  • Fear
  • Supply and demand

Market participants face a great risk if they sell gold in reaction to one of these polarities when in fact the other is controlling the price action. For example, suppose a selloff occurs in global financial markets and gold begins a strong session. Many investors think that fear motivates gold and might believe that the emotional crowd will drive the price higher. However, inflation may have caused a decline in the stock market, attracting a group of traders who will sell gold bullion Brisbane against the gold rally.

Understand the crowd

  • Gold attracts a large crowd with different and often opposing interests. It is the same in Australia as it is in any other country. There are a lot of gold bugs in Brisbane and the city definitely has no shortage of dealers that will be more than happy to buy gold or sell.  The gold bug collects the physical bullion and allocates a portion of the family’s wealth to gold stocks, options and futures. These are long-term, depression-resistant investments. In addition, retail participants comprises mostly of gold bugs, with few fund managers devoted entirely to the trading of gold as a commodity.
  • Gold bugs greatly increase liquidity because they consistently generate buying demand at cheaper prices. They provide effective entry for short sellers, especially in volatile markets.
  • Also, gold attracts a lot of hedging activity from investors and companies that buy and sell to mitigate risks in uncertain times.

Gold in recent times

The recent history of the price of gold shows little movement until the 1970s when the gold standard was replaced by the U.S dollar as it the de-facto universal currency. Gold began a long-term, sustained rise in inflation because of high oil prices. After peaking at $2,420 an ounce in February 1980, it fell to nearly $800 in the mid-1980s in response to the U.S Federal Reserve’s monetary policy. The subsequent decline lasted until the late 1990s when gold entered a high level that in February 2012 was as high as $2,235 an ounce. The old currency then began a steady decline that lasted several years, reaching as low as $1,330 in November 2015. The machine lost another important $2,000 during the COVID-19 pandemic in 2020.

Recently, inflation has jumped to a higher level in 2022; the price of gold has been down for several years, returning to a low of about $1,630 in October. With inflation still lingering and worries about the recession keeping a lot of people on edge, the price of gold is expected to go even further and maybe break the record highs it reached in 2022. In January 2023, the metal was selling for more than $1,900 per ounce.

To sell gold Bullion Brisbane at a good price, you need to know the factors that have a positive effect on the price of gold. Familiarize yourself with the different groups of people who focus on gold. Take the time to work out the long and short term strategies for yourself.