Five Factors Effectively Determine The Trend Of Gold Prices
1. Interest Rates
Interest rates and the gold market are closely related. Investors will pay attention to every speech and meeting of FED. The rate hike will undoubtedly set off a storm in the gold market. In fact, gold has no interest rate, but cash has an interest rate. When the interest rate is high, the so-called opportunity cost value of holding gold will be higher.
2. U.S. Stock Market
The U.S. stock market and the gold market have an incoherent relationship. When the U.S. stock market rises sharply, investors will withdraw funds from the gold market and invest in the stock market, thereby depressing the price of gold. However, the factors of stock market fluctuations are somewhat similar to those of gold, so sometimes they show the same relationship.
Global oil resources are limited. The Iran-Iraq war and the Iraq war all originated from oil, so oil is also a political product. The prices of gold and oil are closely linked, also check and balance each other. Relative stability is hidden in each other’s fluctuations.
Gold and the USD are negatively correlated. When the USD is strong, the price of gold falls. Secondly, gold has a hedging effect on the USD. Usually, when investors are going to protect their capital, they will give up USD and take gold. If USD is strong and the investment in USD has the opportunity to appreciate, people will naturally sell gold and take USD.
5. Politics (Hedging Attributes)
In 1980, when the Soviet Union invaded Afghanistan, the price of gold peaked at $850. In 2011, when the Arabs get into civil war, USD rose to $1,920. Political turmoil in some important countries in the United States and Europe will also affect gold. For investors, gold can be considered an investment to avoid risk.
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