Would you like to know the key factors that make the value of gold fluctuate? “Yes.” Gold is often used as the standard value of different currencies in almost all parts of the world. The cost of gold is always stated as currency value (mostly in US dollars) and fluctuate depending on certain conditions. The following are the factors that influence the value of your gold:

Supply and Demand

All trading commodities are usually affected by supply and demand, and gold is no exception. Thus, any decrease, increase or sudden change in demand or supply of gold impacts its price. How does it work? During certain times of the year, there may be some events, for example, the season of weddings in India that make the demand for gold to rise. Then, the value of gold increases worldwide.

Political and Economic Situations

When the economy gets worse, gold is held on to because it is thought to have intrinsic value. In case that happens, the value of your gold increases due to increased demand. But when the economy is flourishing, the demand for gold decreases and hence its value. The political drama also brings out the same scenario although it is the investors who make the effort of trying to maintain their wealth even after a global recession.

Central Bank Selling and Buying

Central banks are the major players in the gold trade. Thus, the amount they sell or buy makes a big difference in the overall gold trade and, in turn, affects the value of gold. According to the data collected by the World Gold Council, around 60% of the current gold reserves are controlled by Italy, Switzerland, France, Germany and the United States governments.

Interest Rates and Inflation

Traditionally, when the interest of a commodity falls, its price rises and that theory holds for most commodities gold being one of them. The theory is based on some unverified facts that the value of gold increases when the paper money lose value (inflate).

Gold Production

The cost of production and the amount of gold produced can also make the value of gold fluctuate. When the production cost is high, the miners’ increases their selling price, and that gets reflected in the price of gold. Although the amount produced each year is much less than the demand, the prices relatively remain the same.