Three factors that affect gold stock prices in the share market

 

Gold Stock Companies Price

Gold has been the oldest method of investment since time immemorial. While gold is used globally to barter various goods and services, it is also immensely used as the world reserve currency backing the paper currency system.

Whenever it comes to deciding the price of the gold stock, a combination of various factors such as demand, supply, and investor decisions take part in it. Still, to help you better, this article comprises the top three factors that affect the gold stock price in the market.

Read further to learn more about the topic.

Three factors that affect gold stock prices in the share market

1. Economic Fluctuations

Investors do not prefer ‘safe haven’ opportunities when the economy appears to be stable. Gold prices tend to fall during the period of economic growth because inflation and other economic data influence interest rates, affecting the opportunity cost of investing in gold. Even the price of gold seems to rise when the economy is struggling with higher unemployment, low GDP, and slow job growth.
 
History has shown that high economic fluctuations have been a significant influencer of gold stock. However, the gold stock offers less interest and benefits a little when inflation rates are more moderate and are interested interest rates which are an attractive interest-bearing alternative.

2. Advent in gold exchange-traded funds (ETFs)

Exchange-traded funds (ETFs), like mutual funds, enable investors to purchase shares of assets without incurring the risk of investing directly. Gold ETFs acquire physical gold, sell shares to individual investors, and provide fund management services to maximise shareholder returns.
Because of fluctuating investor interest, these funds can impact gold prices—when ETFs account for a large portion of gold demand, per-ounce prices tend to rise. A significant portion of demand is driven by gold ETFs and other investment vehicles. In fact, in 2019, gold investments accounted for 29% of demand (according to the World Gold Council).

3. Increase in gold demand

Long-term gold price development is heavily influenced by the wealth and economic growth of a country. It is because economic boom phases favorably affect gold demand, i.e. demand for coins, bullions, or gold-backed securities. Gold is only purchased in larger quantities above a certain income level, which is legitimate for both gold as an investment & precious gold jewelry. Luxury goods are only acquired by those who can afford them, as evidenced by the exponential rise in private demand for gold in China in recent years.

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