The law of gold price increase and decrease is an issue that always receives attention from gold buyers. Gold is considered one of the most popular investments today. However, if you want to invest in gold most effectively, you need to clearly understand the factors that affect the law of gold’s ups and downs. In this article, HanaGold will help readers understand better.
Why should you care about the law of gold price?
Paying attention to the law of gold buying and selling is the most necessary thing for investors.
Gold is an asset with long-term value and can be used in the process of buying and selling, exchanging between countries. In addition, the fluctuation of gold prices is not affected by market emotions compared to some other types. This helps gold have long-term storage value. When inflation occurs, the trend of buying and storing gold tends to increase significantly.
Gold prices have partly reflected the economic and political situation around the world. Investors can switch from buying to other types of assets to make higher profits when the economy develops. On the contrary, the demand for buying gold as an asset will increase during economic recession.
The fluctuation of gold prices can bring a lot of important information about the economic situation in the world and the psychology of investors. This will help investors visualize the current economic and political situation to make accurate decisions to allocate assets more effectively. From there, investors can make profits from assets while still limiting the risks that occur.
Summary of factors affecting the law of gold prices
Below is a summary of 5 common laws of gold in the total of things to know about the increase and decrease of gold prices.
Global economic and political crisis
One of the leading factors that can create fluctuations in gold prices is the economic and political crisis of a country. The economy is unstable to affect the value of money. This has made gold a safe asset for investors. Accordingly, the price of gold will increase and only stabilize when the market economy recovers.
Central bank’s operating methods and policies
The Central Bank will have an important task in planning a number of monetary policies in each country. Gold buying and selling policies can affect the price of gold. This makes gold more valuable and scarce when banks buy more than sell gold.
In particular, the Central Bank will use quantitative easing (QE) to stimulate economic investment. The strategy of buying securities will increase the money supply as well as encourage other banks to lend. Currently, this method is also applied by many large banks in the world.
Activities from gold trading funds
The influence of gold prices also comes from some ETF funds such as iShares Gold Trust (IAU) with SPDR Gold Shares (GLD). These funds will allow investors to buy gold through the provided certificates.
At present, these funds are holding huge amounts of gold. Therefore, gold prices can fluctuate continuously due to the influence of these funds in the process of massive trading of certificates.
The influence of the USD on the law of gold prices
In addition to the above factors, the USD is also considered one of the components that affect gold prices in Vietnam. According to analysis from experts, currencies and gold prices will have an inverse relationship. If the USD increases, gold prices will decrease. When the USD decreases, gold prices will increase.
The decline in currency will affect the economy and reduce investor confidence. Therefore, they will tend to switch to other cash flows or use gold in the process of trading goods.
Inflation and interest rates
Inflation and interest rates are also factors that affect the law of increasing and decreasing gold prices. In particular, gold prices and interest rates will have an inverse relationship. When bank interest rates decrease, the money supply of the economy will increase. This has led to high inflation.
In the event of inflation, investors will choose to buy more gold to store, so the price of gold tends to increase. When bank interest rates decrease, the price of gold will decrease. At that time, competition from investments will bring higher profits.
The relationship between supply and demand
The law of supply and demand also affects the change in gold prices. This is because gold is considered a special commodity. From 20 years ago, gold miners had to search for quality resources by digging deeper. As a result, they are exposed to various risk factors. This has increased the cost of gold production, causing the price of gold to increase significantly.
Impact of oil on gold prices
Oil and gold will be priced in USD. Therefore, both of these types are correlated with each other. However, this correlation will exist in the case of oil prices fluctuating due to changes in the USD. In the case of oil prices fluctuating due to other factors, it will not be possible to confirm that both of these types are correlated with each other.
Refer to the trend of gold prices in 2024
Some experts have also come up with a rule for gold prices in 2024. Accordingly, the world gold price may increase in the first quarter due to the FED slowing down the rate of interest rate increases. This has caused the value of the USD to decrease. In addition, China’s opening up after the Covid pandemic policy has made the demand for goods in the world improve, including gold.
In 2024, gold prices are forecast to increase to a record high. In the technical chart, the price of $1950/oz is still the main resistance level for gold. Accordingly, this level is still maintained throughout the first quarter of this year and needs a short time to reach the peak.
At the same time, the International Monetary Fund has said that Europe, the United States and China are gradually reducing activities, making the risk of a global recession higher. This can also affect the increase and decrease of gold prices.
Thus, the information you need to know about the law of gold prices as well as the factors affecting the price of gold are also mentioned in detail in the article. Hopefully, through this, investors can equip themselves with more useful knowledge before deciding to buy gold for investment storage.
