Gold is a very lucrative and multi-purposed metal that not only serves to make jewelry and be used in certain electronic devices such as cell phones, calculators, and GPS but is also used for investing.

A big question that comes up for people wondering how to invest in gold is what exactly affects the prices of gold.

As of August 2020, the price of gold was up to $2000 per ounce, and as of January 292021, it was $1848.

There must be some logic to these fluctuations in gold prices. To help you understand why these seemingly chaotic changes take place, we have compiled a list of top reasons the gold price can change.

1. Supply And Demand

At the root of most factors affecting the price of gold, there’s a basic supply and demand equation that’s influencing the price.

In fact, you’ll even see this underlying our next two factors that help you decide when to buy gold online or invest in gold IRA accounts.

A rule which applies to basic economic principles, if the demand for a good increases and people are buying lots of gold and silver coins and bullion bars, online or otherwise, then the price will increase.

But if the demand decreases for whatever reason, then the price to invest in gold or even silver also decreases.

2. The Price of the US Dollar

So the US Dollar is relevant to the price of gold because gold is “dollar denominated.”

Gold being dollar denominated means that the US Dollar is the monetary or cash unit that defines the price of gold at face value.

So if the US Dollar changes in value, this either increases or decreases the price tag of gold in other currencies, which changes the demand of gold, and henceforth, the demand changes the price of gold.

For example, if the USD gets weaker, gold is “cheaper,“more people buy it (high demand), and therefore, the price of gold concurrently also increases.

3. Inflation Rates

Studies have shown that gold actually doesn’t have a direct correlation with inflation itself.

But it does correlate with increasing demand. When inflation takes place, and the economy goes down, people tend to buy gold because it retains value.

Even compared to thousands of years ago, a hypothetical gold IRA in private vault storage around then and now would have approximately the same value.

Ready to buy gold bullion online? Orion Metal Exchange can help you invest in multiple elements, including gold, for a more controlled self-directed IRA.

Find out more about investing in gold responsibly by contacting us here.