What Really Affects the Price of Gold?
Have you ever wondered why the price of gold seems to change from year to year or even day to day? Have you ever wanted to know if you’re getting the best offer when you bring in your old gold and gold jewelry to make some extra cash? Below, we’ll explain three large factors to why the price of gold changes.
1. Federal Reserve Policy
Monetary policy can be described by the Federal Reserve as the Federal Reserve's actions and communications that promote maximum employment, stable prices, and moderate long-term interest rates--the three economic goals the Congress has instructed the Federal Reserve to pursue. Basically, they want to have the economy operating at a healthy level. Opportunity cost is the idea of giving up a near-guaranteed gain in one investment for the potential of a greater gain in another. Opportunity cost can influence interest rates and getting a higher or lower interest rate can affect the cost of gold. If an interest rate is lower gold may become a more attractive to potential investors, but if interest rates are higher, potential gold investors may be willing to buy for lower overall prices of gold or not at all. These investors want to make the smartest decision for themselves in the end, so opportunity cost plays a role in the overall pricing of gold.
2. U.S. Economy
Gold prices are directly related to the economy in the United States. The economic health of the country has an effect on gold prices. When gold prices are higher it is a sign that the economy is not doing too well, but when gold prices are lower it means that the economy is in a more stable position and health generally speaking. You’ll always know the true state of the economy in the U.S. when you look at current gold prices.
3. Supply and Demand of Gold
The supply (the amount of gold available at any point in time), and the demand (the want or desire to obtain and own gold) all factor into the price of gold. Generally, if there is more demand for gold, the prices will go up because the supply will go down. The opposite is true as well, so if there isn’t a high demand for gold and the available supply is very high, the price will typically be lower.
Next time you consider selling your gold to a gold buyer like Pawn America, consider these factors before you sell your gold. You’ll want to make sure you consider if the gold market is attractive to potential investors, the current climate of the United State’s economic situation, and what the current level of supply and demand for gold is when you want to sell your gold. Feel free to stop into any one of our 17 store locations throughout Minnesota and Wisconsin and talk to a certified gold seller today!