The daily price of gold is determined by global market forces and is influenced by many economic, political, and financial factors. Here's a breakdown of how it's set and why it fluctuates:
💰 HOW GOLD PRICE IS DETERMINED EACH DAY
1. Spot Price (Global Benchmark)
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The gold spot price is the current price for immediate delivery of gold (per ounce), traded on major commodities markets like:
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London Bullion Market (LBMA)
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New York Mercantile Exchange (NYMEX/COMEX)
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This is updated continuously as markets trade 24/7 globally.
2. London Gold Fixing (LBMA Fix)
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Conducted twice daily (10:30 am and 3:00 pm London time) by a group of banks.
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They set a reference price used for contracts, pricing jewelry, and settlements.
3. Futures Markets
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Gold futures contracts (agreements to buy/sell gold at a future date) are traded on exchanges.
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These influence the current (spot) price, especially through speculation and hedging.
📉 WHY GOLD PRICE FLUCTUATES
Gold is treated both as a commodity and a store of value, so its price changes due to a mix of short-term market moves and long-term macroeconomic trends.
🔄 1. Supply and Demand
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Demand from jewelry, central banks, and investors drives prices up.
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Supply from mining and recycling affects availability.
💸 2. Currency Strength (Especially USD)
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Gold is priced in U.S. dollars. When the dollar strengthens, gold becomes more expensive for other currencies, reducing demand.
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When the dollar weakens, gold becomes more attractive.
📈 3. Inflation and Interest Rates
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Gold is a hedge against inflation. When inflation rises, gold prices often go up.
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High interest rates make interest-bearing assets (like bonds) more attractive than gold (which pays no interest), so gold prices may drop.
🌍 4. Geopolitical Events
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War, political instability, or economic crises increase uncertainty — investors flock to gold as a "safe haven" asset, raising its price.
🏦 5. Central Bank Policies
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Central banks buying or selling gold, or changing monetary policy (like printing money), affect global trust in fiat currencies and gold demand.
📊 6. Investor Behavior
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Hedge funds, ETFs (like SPDR Gold Shares), and individual investors buy and sell based on trends, speculation, or fear — contributing to price swings.
📌 Example:
Imagine inflation is rising and a war breaks out in a major oil-producing country. Investors may lose faith in paper currency and rush to buy gold. Demand surges — price rises. A few weeks later, a peace deal is signed and inflation is controlled. Investors pull back — gold price falls.