One of the first metals used by humans is gold. Since primitive times it has been one of the most treasured metals. One of the basic factors in deciding the global economy is gold. The price of gold is the major indicator of the status of the global economy. There are several factors that affect gold prices, a few of them are:

1. Gold production

Due to the rising cost of production in mining of gold, frequent strikes by the miners, declining political situation, sudden rise in the oil prices after the Iraq war, a reduction in the gold production has been noticed in the last five years. The world population is growing day by day and at the same time is the demand of the investment in the bullion. Since ages, man always has believed to invest in bullion and they hoard gold for a good period of time which also affects the gold prices.

2. Worth of US Dollar

The basic factor that determines the gold price is the worth of the US Dollar. The cost of the gold will be less and controllable if the US dollar is stronger. The rate of the gold increases if the dollar performs weakly in the market. US economy plays a crucial role in determining the macroeconomics of the world. People invest, buy and deal in dollars when it is performing strongly. Recently, Us economy was badly hit which effected the dollar prices. This is the reason why nations and people have started investing in gold bars. If a country has high reserves of gold then it gives a boost to the economy and acts as an hedge for inflation.

3. Demand for gold by the Chinese and Asian market

India and China are the biggest buyers of bullion for their jewelry market. Recently Chinese citizens were allowed to have ingots for the first time in history. This generated a high demand of bullion, which consequently affected the price of bullion throughout the world. In 2009, there was a decrease in the demand of the gold due to the global economic crisis, which had an effect on the gold price.

4. Reserves of central bank

Central banks keep ingot reserves which cancels out the effect of inflation. The other factor that affects the prices of the gold is the monetary policies of the central banks. The factor that discourages people from investing in paper money is the low interest rate; they then turn towards gold in hope of good returns. If the central bank offers high interest rates, there are good chances that the prices of ingot will fall.

5. Increasing investment in gold

In the past few centuries, every time people sensed that the dollar is performing badly in the stock market, they begin investing in gold coins or gold funds. Bullion is surely going to give them more value than anything else and this is what multiplies the demand in gold.