Exactly how much do you know about the price of gold? You might know what the gold price is at the moment. You might also know what the gold price has been historically. But do you know what causes these fluctuations – in short, what makes gold rise and fall on a day to day basis and over longer periods?

If you want to make the most out of your gold investment, it helps to know these things, so here are a few things to watch out for.

Watch inflation rates

The price of gold tends to rise over time, both because its inherent value rises, and because its immediate price rises against inflating currencies. That means that the more a currency inflates, the higher the price of gold will become in relation to that. High inflation therefore often makes for high gold prices, whereas low inflation or even deflation may lead to lower prices.

Do Federal Reserve rates affect the gold price?

The rates of interest charged by the US Federal Reserve are disputed as a factor in the gold price. To a lesser degree, the rates of other major economies are also under consideration, but the US, as the biggest economy of all, tends to be the focus of attention.

This is because the Fed’s attitude to the rate is seen as an important sign as to the strength of the US economy. Cuts in interest rates are designed to promote investment and growth and stimulate economic activity. If they happen, they tend to come as a result of a perceived need to help support a less-than-ideal level of economic activity. This viewpoint can signal doubt in the economy and therefore increase demand for gold as a safe-haven investment.

Hikes in the rate can have the opposite effect and often decrease demand for and the price of gold as the flourishing economic environment offers other investment opportunities.

However, it is disputed to exactly what extent the Federal Reserve rate decisions really impact on the gold price over the longer term. Investopedia offers a good article analysing the situation here.

Economic and political uncertainty

Because gold is such a trusted commodity, it is often turned to when other investments like currencies and shares are proving to be less resilient. For this reason, nothing gets the price of gold soaring like economic uncertainty – and nothing gets economic uncertainty going like political uncertainty.

Uncertain election results and unstable governments often cause the price of gold to rise and are a key indicator for those in the market.

If you want to make the most out of your investment into gold coins or gold bars, take a look over our entire range today. Or if you’re new to buying gold, take a look over our gold price charts to find out more about the precious metal’s price trends over the years.