In Saudi Arabia, gold has always been important because it was worn during weddings and festivals as a sign of a husband's appreciation for his wife. Through the years.
In recent months, gold prices have risen steadily. After collapsing due to the shutdown, they were able to ramp it up and cross the $ 2,000 per ounce mark in July 2021.
While gold is often considered a safe investment and store of value, it is also a productive commodity and is subject to the same economic forces.
When gold miners produce excess gold compared to demand, the price will come under downward pressure due to the laws of economics.
Speculators who accumulate or abandon gold in the market can create temporary imbalances that lead to rapid price changes.
Factors Affecting Gold Prices
While there is a lot about the factors that affect the stock markets, many investors ignore the reasons why gold prices are going up or down. Here are some of the common factors that cause a price change:
1. Supply and demand
As with any commodity that is traded, the supply and demand for gold plays an important role in determining its price. Unlike oil, gold is not a consumable product. All the gold mined is still available in the world. Also, the amount of gold mined each year is not very high. Therefore, if the demand for gold increases, the price increases because the supply is relatively tight.
2. Inflation
When inflation rates rise, the value of the currency falls. Also, most other investment methods do not produce returns comparable to inflation rates. Therefore, most of the people start investing in gold. Even if high inflation rates persist for a long time, gold acts as an ideal safe haven because it is not affected by fluctuations in the value of the currency.
3. Interest rates
Gold prices are inversely related to interest rates. When interest rates go down, people don't get good returns on their deposits. Therefore, they tend to break up their deposits and buy gold instead, which causes an increase in demand and therefore an increase in price. On the other hand, when interest rates go up, people sell their gold and invest in deposits to earn high interest, which leads to a drop in demand and price.
4. Saudi jewelry market
People in Saudi Arabia buy more gold during the wedding seasons, so the demand for gold increases, which drives up its price.
5. Currency fluctuations
In international markets, gold is traded in US dollars. During importation, the dollar is converted into rials. Therefore, any fluctuation in the US dollar or the riyal can affect the import price of gold and therefore the sale price.
These are some of the common factors that affect the price of gold.
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