Interested in commodity trading but remain worried about the fluctuation in gold price! Well! Like any other stock, commoditiesare volatile, too, making it confusing and riskier for a trader to make the right trading decision.
This article discusses why the gold price fluctuates so frequently and how to trade smartly in this commodity.
Do you know? India is one of the largest consumers of gold. And fluctuation in gold price is one of the trends these days, changing almost daily. There are specific patterns that lead to the fluctuation in gold prices.
But the main question is still the same, why do gold rates fluctuate? What are the causes or the reasons for this? Let’s find out in this article.
Why Gold Prices Fluctuate?
Let’s throw some light on some of the reasons for fluctuations in gold prices in this segment. There are a couple of reasons that are responsible for the same. Let’s discuss it one by one.
1. Demand and Supply: As gold is a natural resource, the availability of gold is in some places, and so does the production. There is a massive demand for gold, but the gold prices fluctuate due to the limited supply.
For instance; Recently, China unloads gold into the global market, which means there is surplus supply but low demand, hence, decreasing the price of gold.
2. Change in Currency: Gold is traded in global currencies with US Dollars. Any changes in these currencies will lead to a fluctuation in the gold price.
Since ancient times, gold rates are inversely proportional to the US Dollar. A change in other currencies would affect the gold rates, but that might not be visible.
3. Government Policies: The impact of government policies has a direct or indirect effect on the gold price.
For instance, the US government’s forthcoming decision to cut the interest rate affect gold prices even though it was just a thought.
And the same fluctuation happens in the other continents when the gold producers do similar actions like this.
4. Investment Trends: Gold has been considered one of the safest investment options, but nowadays, with the new opportunities coming up in the market, people get into new experiments.
Changing investment needs might lead to gold price fluctuations because gold doesn’t give the number of investment results, people think.
The temptation of high returns made investors attract other investment opportunities, leading to the fluctuation in demand and supply.
5. International Connections: International connections might fluctuate the gold price.
Constrained international relations between gold producers and other nations, which are essential, can push the prices higher, where good international relations could decrease the gold price.
6. Central Bank Activities: Most probably, gold is a stable investment in terms of survival, that is why every country has a gold reserve handled by the central bank of every nation. Any decision taken by the central bank will be responsible for fluctuation in the gold price.
Thus, the fluctuation in the gold price can be due to many reasons. Investing in commodities like gold can help you earn profit and create wealth and help build your portfolio.
Even in pandemic conditions like Covid-19, gold’s price keeps rising, thus offering valuable returns to investors.
Before investing in the Gold commodity, it is good to do proper analysis and keep an eye on India’s price fluctuation.
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