How Gold Prices Are Determined – 2024 Guide

Like the prices of petrol and diesel, the cost of gold also changes daily. It must have so happened that the price of gold surged overnight. Have you ever wondered why this happens? Here we have talked about the various factors that determine the price of gold.

Gold is considered one of the best investments, and investors of all scales can choose to make investments in this metal. Numerous cultures consider gold as a symbol of wealth. Investors buy it to diversify their portfolio and use it as a blockade against the rise in commodities and currency depreciation costs. People consider investing in this precious metal as it is one of the widely accepted investment options. However, only a few are aware of the factors that control the cost of gold. Consider visiting to know more about the cost of gold and what causes fluctuations in its value.

The value of this metal depends on many things. Economic and political reasons, both local and global, are the most important common factors. For example, if a country’s government has implemented a new rule related to importing this metal, its cost will be affected. Similarly, if this metal production in a country decreases in a year, it will impact the domestic market’s gold value. Many such incidents that occur globally can affect the metal’s value.

Source: Wall Street Journal

Factors That Determine the Cost of Gold

The Spot Price of Gold

The value of this metal, which is instantly delivered right after its purchase, is known as the spot value. If you look forward to averaging the net worth of gold futures bought and sold recently, you will get a spot value. In the standard market scenario, the value of this metal is considerably more than its spot value. Moreover, when the demand for physical metal in the market increases, its spot value becomes more than that of the futures. Visit for the latest spot gold prices and gold market research.

Futures Prices

The futures cost serves as the basis of the LBMA Gold cost. They represent contracts for the delivery of a specified amount of gold in the future. Numerous factors are responsible for determining the price of futures. Costs of transporting and storing it are also considered. The physical gold is not delivered when purchased, and this trade is usually electronic. Since the nature of demand and supply factors are uncertain, the investment made in futures is risky.

Source: KPBS

Conditions Of The Market

Economic and political happenings are highly responsible for shaping different market conditions and are also responsible for influencing this metal’s prices. The price of this metal reflects the financial health of a country. At the time of the great recession, the cost of this metal had increased. Also, there was an incredible rise noted in the price of an ounce in 2011. It recorded a value of $1917.90, which was an all-time high. Also, the economic and political chaos in Europe were believed to fuel the purchase of assets like gold.

Demand And Supply

The basic concept of demand and supply is one of the major factors responsible for influencing commodities’ price, including Gold. When the demand for this metal is high and its supply is low, it is natural that its prices will rise. On the contrary, when there is high supply and low demand, the price decreases.

If you’re wondering how to buy gold online, it’s important to understand how gold prices are determined. Factors such as global supply and demand, economic conditions, and geopolitical events can all impact the price of gold, so it’s essential to stay informed and work with a reputable dealer when making your investment.

Since the production of this metal is finite, the supply will always be scarce. Some analysts have reported that the metal reached its peak several years ago, and hence, now the production will only decrease. However, the demand for it in almost every sector, including medical, central banks, and technology, will always stay strong.


Fear Of Equity Fall:

Last year, equity also got good returns internationally. Still, there is a possibility of a further downward trend, which will increase investor sentiment towards the metal as it is a safe investment tool.

Global Economic Sluggishness:

The global economy’s growth has slowed due to the confrontation between the US and China over the last 18 months on trade issues. The atmosphere of uncertainty is not over yet. It is the reason why the price of this metal increased in the previous year.

Source: International Banker

Geopolitical Tension:

The metal’s prices are affected by deepening military tensions in the Gulf region due to confrontation between Iran and America. Tensions between Iran and the United States increased further following Iranian Major General Qasim Suleimani in a US Airstrike back in 2019. On the other hand, North Korea has warned to resume molecular testing, which has already created geopolitical tension. It, in turn, has led to an increase in the metal’s prices.

Gold Price Administrative Unit:

Many people know that demand and supply are important factors in deciding the price of this metal. That is when demand is high, and supply is low, its prices jump. However, an operating and administrative unit works internationally and nationally to fix the metal’s prices.

Before 2015, the London Gold Fix was the gold regulatory entity. But after 2015, a new entity was formed. The new entity is named the London Bullion Market Association (LBMA) and is run by the ICE Bank Administration. This organization works jointly with the national-level organizations associated with all the world countries’ governments to decide this metal price.

Source: Hindustan Times

ETF Buying

The most significant factor in the rise of this metal’s price has been ETF (exchange-traded funds) buying. Global ETF buying had spiked up by about 295 tonnes the previous year. Also, the ETF holding amounted to 2,308.6 tonnes at the end of the year. Talking about the global market, weakness in the domestic currencies also accounts for the increase in this metal’s price.


Many reports have stated that the demand for gold at a global level is 1,000 tonnes more than its supply. Moreover, gold is believed to be recycled at a greater level because it’s new capacities are not mined. Less supply is one of the major factors responsible for fluctuations in the price of gold. Inflation is another factor responsible for changes in its rates all over the world.

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