What Factors Affect the Price of Gold

Detail of a lustrous gold bar.

The price of gold has experienced major fluctuations in recent history. In 2011, the price of gold reached record highs above $1,600 per ounce, sparking a frenzy in gold investing.

Though the price of gold isn’t as high as 2011, gold still remains a good investment that provides protection against inflation, safety when the markets fall and exceptional liquidity. Gold as an investment is also a great way to diversify your investment portfolio and is a universally commodity.

If you’ve ever thought about investing in gold or even selling gold to a gold buyer like Modell Loans, you may wonder what drives the price of gold up or causes it to fall. There are a number of factors to consider in order to understand the price of gold:

Supply and Demand

Gold has always been and will continue to be in high demand, and, though the supply is limited and finite, the demand continues to increase.

Strength of the US Dollar

A stronger US dollar will lower the price of gold and vice versa. When the economy is strong and the value of the US dollar is strong, investors tend not to trade in bullion and precious metals as much. When the value of the dollar is weak, however, investors are more likely to invest in bullion and other precious metals.

Central Banks

Central banks keep large reserves of gold ingots and other precious metals and buy and sell them according to the movements of their currency.


The price of gold can be affected by production around the world. Production costs, the rates of production and political and social conditions where mines are located can all affect the price of gold.

These are 4 key factors that can affect the price of gold. However, there are several other factors – such as interest rates, trade imbalances and price movements – that can also have an impact on gold prices.

If you’re interested in having the value of your gold item appraised or looking for a pawn loan on your gold, visit one of Modell’s locations in New York City. We are also happy to appraise your diamond, platinum and silver jewelry or answer any questions you may have.