Factors That Influence the Gold Price: How the Price Is Formed

The gold price is in the news almost every day – sometimes it rises, sometimes it falls. But what does it actually depend on? Knowing the most important influencing factors helps you put price movements into perspective more calmly.

In this article, we explain how the gold price is formed, which forces move it and what this means for the price of gold jewelry. We deliberately do not make forecasts.

Where the gold price is formed

Gold is traded worldwide, above all at major trading centers such as London and New York. Internationally, the price is usually quoted in US dollars per troy ounce (around 31.1 grams). In Germany, it is converted into euros, often also per gram.

The most important influencing factors

Interest rates and monetary policy

Gold pays no interest. When interest rates are high, interest-bearing investments seem more attractive. When they fall, gold comes more into focus for many investors. Central bank decisions are therefore closely watched on the gold market.

Inflation

When money loses purchasing power, many people look for tangible assets. Gold is traditionally seen as a way to preserve wealth over long periods.

Uncertainty and crises

In times of economic or political uncertainty, many investors turn to gold. This role as a “safe haven” can significantly increase demand in the short term.

The exchange rate between the euro and the dollar

Because gold is traded internationally in dollars, the exchange rate plays an important role for buyers in Germany. If the euro is weak against the dollar, gold becomes more expensive in euros – even if the dollar price stays the same. Conversely, a strong euro can dampen the price in euros.

Supply and demand

• Mine production: Developing new gold deposits takes many years, so supply grows only slowly.
• Recycling: Old gold is melted down and reprocessed – often more so when prices are high.
• Central banks: Purchases and sales by central banks noticeably influence demand.
• Jewelry and industry: A large share of annual demand comes from jewelry, a smaller share from technology.

What this means for gold jewelry

The price of a piece of jewelry consists of two parts: the material value, which depends on gold content and weight, and the value of design and craftsmanship. When the gold price fluctuates, it is mainly the material share that changes. A 916 piece (22 karat) reacts more strongly than a 585 piece (14 karat) because it contains more fine gold.

Read how to handle fluctuating prices when buying jewelry in our article The Changing Gold Price. You will find our current selection among our gold chains in 585 and 916.