FX.co ★ Five reasons why gold prices increase

Importance of gold reserves for states

Experts consider gold as a standard of material values and a way of expressing commodity-money relations. For a long time, budgets of many countries were directly dependent on gold reserves. This period is characterized by a fixed exchange rate.

Inflation's impact on gold

In today's world, the value of gold has changed a bit, but states still care about national gold reserves. Authorities are more often concerned about rising prices and declining consumer activity. These adverse processes force governments to take additional measures, one of which is inflation, that is, the withdrawal of extra money from circulation. At the same time, the cost of gold shows multidirectional dynamics, from a sharp drop to active growth.

Financial crisis' impact on the gold value

The pre-crisis period was characterized by a fall in gold prices. In 1999, a troy ounce of the precious metal cost $253. For several years, its value has hardly changed. The global economic crisis of 2008 caused a boom in gold prices. Its cost continued increasing. Over the past 10 years, experts have recorded a steady rise in prices for gold.

The impact of interest rates and the US dollar rate

Currently, gold prices are on the rise. In December 2018, gold futures rose from $1,235 to $1,250 per ounce. Bank of America believes that the weakening of the dollar, inflation in the United States and low interest rates will be drivers of gold price growth in 2019. According to the forecast of the bank, the cost of the precious metal will reach $1,296 per ounce. Over the next year, a rise to $1,400 is not excluded. This year, three factors constrained the price of gold: an increase in interest rates, the growth of the US economy and the strengthening of the dollar, and in 2019 their impact will weaken.

Exchange trading and its impact on the gold rate

The rise in the value of gold is significantly affected by trading on the stock exchange. This metal is actively trading on global stock markets. The dynamics of gold prices largely depends on stock speculation. Experts consider gold a serious type of long-term investment. It is a very profitable investment which is characterized by a certain cyclical nature. The value of gold depends on the activities of central banks and the regulation of their processes on stock exchanges.