Question

what is the common fact that impact gold stock's price in modern world. Please explain in detail sentences. Thank you

Answer 1

1. Global Crisis: Because gold prices tend to rise when people lack confidence in governments or financial markets, it often gets called a crisis commodity. World events often have an impact on the price of gold because gold is viewed as a source of safety amid economic or geopolitical tumult.

2. Geopolitical Stability: Geopolitical stability plays a crucial role in determining the price of gold. The prices of gold tend to drop when there are no political tensions. War tensions between countries and zones raise the value of gold. This is because gold is the default commodity to hedge one’s investments in crisis situations.

3. Infaltion: A common reason cited for holding gold is as a hedge against inflation and currency devaluation. Currency values fluctuate, but gold values, in terms of what an ounce of gold can buy, might stay more stable in the long term. Because gold holds value outside of politics—it is valued the world over—gold is attractive as a low-risk, solid investment in the midst of floundering currencies. Investors may feel encouraged tobuy gold when they believe the value of their paper money will decline.

4. Value of the U.S. Dollar: The U.S. dollar is still the world’s dominant reserve currency, making it one of the main currencies that different countries hold for international trades. The price of gold and the strength of the dollar have a pretty clear inverse relationship; when the dollar is strong, gold is weaker, and vice versa.

5.Government Reserves: Central banks, like the U.S. Federal Reserve, hold both gold and paper currency in reserve. In fact, the United States and several European countries hold the bulk of their reserves in gold, and they have been buying more gold for these reserves recently. Other countries that hold gold include France, Germany, Italy, Greece, and Portugal. When these central banks start to buy gold in greater quantities than they sell, it drives gold prices up. This is because the supply of currency increases and available gold becomes more scarce.

6. Interest rates: Gold does not pay interest like treasury bonds or savings accounts, but current gold prices often reflect increases and declines in interest rates. As interest rates increase, gold prices may soften as people sell gold to free up funds for other investment opportunities. As interest rates decrease, the gold price may increase again because there is a lower opportunity cost to holding gold when compared to other investments. Low interest rates equate with greater attraction to gold.

7. Supply And Demand: Supply and demand is a simple rule that affects the prices of the majority of commodity and asset prices around the world. The demand for gold can increase due to a number of factors and the majority of them have been listed above. If this happens, its prices will significantly go up until the situation eases.