Demand and supply are basic aspects of economics. Demand and supply of a commodity or goods like gold can be determined with several factors such as; the prevailing market price, income of an individual, preferences, and choices, season, age and gender among many other factors. Of late we have witnessed a peculiar trend in the gold market where there is a decrease in the prices of gold despite the presence of high gold demand. This occurrence is against the law of demand which states that “The high the demand of a commodity the higher its market prices”. Although recent predictions have possed presence of high demand for gold.
We will look at factors that majorly affects the gold market to determine how each is likely to increase or decrease the price of gold. The primary factors that are likely to affect the price of gold this year or in the future are;
- Demand for physical gold
- Central Bank Buying
- Demand for gold ETFs
- New Mine Supply
- Technical indicators
- The US dollar among many other factors
Increase in physical demand for gold does not always increase the price of gold but it increases the interest in gold. High ETFs supply will definitely increase the prices of gold, and we have witnessed a tremendous in ETFs in the recent past. Central banks around the globe hold golds in their reserves. When they feel they want more they buy more thus increasing the demand for gold. With a constant increase in demand with no new supply, there will always be an increase in gold prices since the market supply cannot match its demand.
Therefore given that most factor that determines the prices of gold are most likely to increase then the prices of gold are also most likely to increase year in, year out.