The Factors That Can Influence the Price of Gold?
- Jun 23, 2025
- loveGOLD
- 3 minute read
The information contained in this article is current as of the date of publishing.
Price is one of the key factors for any purchase or investment. When it comes to buying gold, that consideration can be complicated by the fact that, although historically stable over the long term, gold’s price can be quite volatile in the short term.[1] The price of gold can vary by day or even throughout a single day, and it won’t be the same from every dealer. In this blog, we’ll take a closer look at how gold prices are set and explore some of the factors that have historically affected the price of gold.
The information contained in this article is current as of the date of publishing.
Price is one of the key factors for any purchase or investment. When it comes to buying gold, that consideration can be complicated by the fact that, although historically stable over the long term, gold’s price can be quite volatile in the short term.[1] The price of gold can vary by day or even throughout a single day, and it won’t be the same from every dealer. In this blog, we’ll take a closer look at how gold prices are set and explore some of the factors that have historically affected the price of gold.
HOW THE PRICE OF GOLD IS DETERMINED
There are typically three elements that influence the price you might pay for gold on a given day.
The first is the benchmark price set twice daily in the United Kingdom by the London Bullion Market Association (LBMA).[2] The LBMA benchmark price is set through an auction process administered independently by the ICE Benchmark Administration.[3] It is quoted officially in US dollars per troy ounce, but is also available in 16 other currencies.[4]
The second element of the price of gold is the spot price, which fluctuates throughout the day based on market dynamics, including what buyers and sellers around the world are doing. The spot price is typically influenced primarily by institutional and large-scale investors.[5]
Finally, gold purchases are typically subject to premiums and other fees set by individual dealers. For example, gold bullion bars and coins usually have premiums attached to them to cover the costs of designing, manufacturing and storing the gold. Dealers may charge additional fees to cover other costs, so don’t be surprised if you get different quotes from different dealers.
FACTORS THAT CAN AFFECT THE PRICE OF GOLD
So what determines how the benchmark and spot prices are set? Many factors have historically been shown to affect gold prices, including:
Central Bank Reserves
Central bank reserves: Many central banks hold much of their reserves in gold. When these banks buy more gold, this has had a tendency to drive the price of gold up.[8]
Risk & Uncertainty
Gold has historically retained its value through a wide range of circumstances, leading many to view it as an effective diversifier in the face of risk. This includes inflation, with greater demand often seen in the past during periods of high inflationary pressure.[9]
Industrial Demand
Gold is used in a variety of industrial applications, including electronics, semiconductors, and space exploration. Expansion in these types of industries has often led to increased demand for gold, which has sometimes had an impact on gold prices.[10]
Opportunity Cost
Gold prices historically have had an inverse relationship with the performance of other types of investment. In other words, when those investments perform well, demand for gold historically has dropped, while poor performance of other investments historically has driven investors back to gold.[11]
Value of the US Dollar
In the past, a stronger US dollar has typically driven the price of gold down or kept it stable, while a weaker US dollar has often resulted in rising gold prices.[12]
Interest Rates
Historically, higher interest rates have been correlated with lower gold prices. However, this is not always the case, as seen as recently as December 2023, when both interest rates and gold prices peaked simultaneously. However, while the relationship is not entirely predictable, changes in interest rates have typically in the past had some kind of effect on gold prices.[13]
Gold Production
Much of the most easily accessible gold has already been mined, which means that as mining continues, it gets more challenging and presents greater risk to both human health and the environment. All that makes mining gold more expensive, which has been shown to drive the price of gold up.[14]
Geopolitical Factors
In times of heightened geopolitical tensions, investors have historically turned to gold as a safe haven investment, which in the past has led to higher prices.[15]
Momentum
Once a trend starts, whether up or down, prices have historicallyontinued in the same direction unless interrupted by another factor.[16]
GOLD: A COMPLEX INVESTMENT
Gold pricing is complex and depends on a wide range of interrelated factors. This means that, while gold has historically tended to maintain its value over the long term,[17] its short-term volatility can make investment decisions challenging. The factors presented in this blog have been observed throughout the history of gold investment; however, these past trends do not guarantee future performance. That’s why it’s vital to always consult your financial advisor before making any decisions about investment in gold or other precious metals.
Important information and disclosures
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The information provided herein is intended for informational purposes only and is not intended to constitute investment, financial, legal, tax or accounting advice, and you should not rely on the information herein for such advice. Past performance, and historical trends are not indicative of future results. Many factors unknown to the Mint may affect the applicability of any statement or comment made herein to your particular circumstances, and this information does not take into account any investment objectives, financial situation or particular needs of any particular person. You should directly consult your financial professional or other advisors before acting on any information herein. The information and materials herein are provided with the understanding that the Mint is not acting in a fiduciary capacity. Nothing contained herein constitutes a solicitation, recommendation or offer for the purchase or sale of products or services of any kind whatsoever. Diversification does not guarantee any investment returns and does not eliminate the risk of loss.
The information provided herein may contain forward-looking statements which are based on current expectations and are subject to change. Forward-looking statements involve significant known and unknown risks, uncertainties and assumptions. A number of factors could cause actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements. These statements are not guarantees of future performance and should not be relied upon as such. The Mint assumes no responsibility for updating any information, including forward-looking statements, contained herein.
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[1] Investopedia, What Drives the Price of Gold?
[2] LBMA, LBMA Gold Price FAQs.
[3] LBMA, LBMA Gold Price FAQs.
[4] LBMA, LBMA Gold Price FAQs.
[5] Royal Canadian Mint, How Is the Price of Gold Determined?
[6] Royal Canadian Mint, What Drivers Influence the Price of Gold?
[7] Investopedia, What Drives the Price of Gold?
[8] Investopedia, What Drives the Price of Gold?
[9] Royal Canadian Mint, What Drivers Influence the Price of Gold?
[10] Money, What Drives the Price of Gold?
[11] Royal Canadian Mint, What Drivers Influence the Price of Gold?
[12] Investopedia, What Drives the Price of Gold?
[13] Money, What Drives the Price of Gold?
[14] Investopedia, What Drives the Price of Gold?
[15] Money, What Drives the Price of Gold?
[16] Royal Canadian Mint, What Drivers Influence the Price of Gold?
[17] Investopedia, What Drives the Price of Gold?
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