Factors Affecting Gold Value in USA

Factors Affecting Gold Value in USA

What are the factors affecting Gold value in USA

There are many factors affecting gold value in USA and we will explain some of the major ones in this section. Gold, a highly precious metal is an ideal and a popular investment option that has traditionally yielded great returns. However, its price and value often fluctuate. As a result, those who invest in physical gold and gold futures need to closely keep an eye on the prices. Here, are some of the top factors that affect the price of gold, in the US, one the most powerful nations across the globe.

Major factors affecting gold value in USA


According to many analysts, inflation is one of the biggest movers of the value of gold. There is a strong belief that the metal in itself does not have a personal use or a practical value but it is mainly used to retain wealth and value. For this reason, in the event of inflation, when the value of the dollar goes down, investors turn to gold as a way of preserving its value. This in turn increases the demand for investment in the metal hence, driving up gold prices and its overall value.

However, gold is quite sensitive in nature and this applies to its market which is characterized by fears and not necessarily actual inflation. Therefore, inflation fears makes people think that gold is more valuable and is a prerequisite for an increase in its value.

Price or strength of the dollar

Since time immemorial, the value and price of gold has moved counter to that of the dollar. One of the major reasons behind this is that over a long period of time, specifically 1931-1971, the dollar was the only global currency that was backed by the metal. For this reason, the dollar became the most highly favored currency reserve.

It is imperative to note that about 85 percent of central bank reserves across the globe are in dollars. In the USA, the dollar has become a major gold substitute and in many ways. This means that the currency is a safe haven asset for the metal. As a result, weaker U.S. dollar means that the demand for the metal to store preserve the metal would be high thus, driving its prices high. A strong dollar means that people will not need to purchase gold to sustain their wealth.

US Equities

Historically, US equities inversely trade with gold. This means that with a string equity market, there is a likelihood of a poor gold market. On the other hands, a weak equity market leads to a higher value of gold. This is based on the fact that equity market is paper based. It is equally important to note that such a market is highly sensitive to the value of the dollar and overall status of the economy.

What’s more, investing in the metal is a substitute for stock investment. All of the above put together, investors often seek to protect their wealth when equity market is highly volatile. This ends up increasing the demand for investment in gold, hence its value and price.

Central bank and mining companies

Central banks hold gold and paper currencies in reserve. Therefore, with a large amount of gold reserves affect the value of gold. These market players affect gold rate by massively purchasing or selling the metal. In other cases, they reduce the output in the case of mining companies. For this reason, the power of Central banks should not be at any point underestimated.

Central bank holds up to 16 percent of gold and with the Washington Agreement on Gold from 1999, there is a cap on gold sales by its member states including all United States of America, Europe, Australia, the International Monetary Fund and Bank of International Settlements. The agreement limits gold sale to less than 5000 tons per year thus, affecting its value.

Other factors affecting gold value in USA

While central banks, inflation, strength of the dollar and US equities are some of the main factors affecting value of gold, there are also others that affect its price and they include

  • Increase in per capita income
  • Government policies
  • National emergency situations and
  • Trading and speculation

These factors play a crucial role in determining price of gold.

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