Why gold is dearer..

What factors influence the price of Gold:

 

1. Changes in exchange rate: A weaker U.S. dollar exchange rate is usually encouraging the increase in world gold prices. This is because investors choose to sell their dollar and then buy the gold with the hope that gold can protect the value of their assets.

2. World political situation: Increase of gold price in the end of 2002 and early 2003 occurred as a result of the attack to Iraq by the U.S.

3. Supply and demand: Due to by mining companies (happened in mid 1980's) and also many times due to the central banks decision put on European countries to reduce their gold reserves due to implementation plan of euro currency.

4. The global economic situation: Approximately 80 percent of the total supply of gold has been used by jewelry industry. Jewelry consumption is a major influence on the demand side. As economic conditions improved, the need for gold tend to rise. However, the most sensitive industry to be influenced deeply is jewelry industry.

5. Interest rate: When interest rate rise, peoples tend to keep money on deposit better than gold which does not earn interest (non interest-bearing). This will cause pressure on the price of gold. Conversely, when interest rate fall down, the price of gold will likely rise.

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