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Factors Influencing the Current Gold Price
 Peter Hann
The current gold price depends on a number of factors. Gold often behaves rather like a currency and its price can rise at times when investors cannot find a safe haven in the dollar or another strong currency. Another factor that can influence the gold price is supply and demand. The demand for gold can fluctuate because there is demand for gold in the manufacture of jewelry and for some other industrial uses.
At a time when there is no confidence in the performance of any particular currency and this is combined with strong demand for gold in industry, the price can rise significantly. A potential investor has to consider to what extent the price at any particular time has been affected by speculation. There can be a strong influence from speculators at times when the price has been rising and is expected to continue to rise. The expectation becomes self-fulfilling as more investors put their money into gold and this can create a bubble effect in the price.
Caution must therefore be exercised even when the indicators point to economic conditions that may cause the current gold price to rise. Investors must look at the future pattern of demand for gold and the likely future confidence levels in currency markets. They may decide that the price of gold is still on an upward trend.
The demand for gold in the jewelry trade can fluctuate at different times of the year and potential investors should look carefully at patterns in consumer demand. For example, there may be a demand for gold in certain parts of the world at certain festivals when gold may be given as a gift. The effect on demand may be enough to cause a real difference in the gold price.
In the final analysis a cautious approach is advisable whatever the current gold price level. Investors who are interested in precious metal investments should also look at silver and platinum which have more industrial uses. They might also consider diversifying their investments by means of purchasing a basket of precious metals. This might be done for example by acquiring an exchange traded fund representing investments in a range of precious metals.
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