The rising gold price has been headline news for over a decade as the seemingly inexorable rise continues to match the highs of the 1980s. From reaching a 30 year low in 2001, the gold price per ounce has risen from around $360 to $1,825 in August 2011 and is currently trading at around $1,220.

Historically, the gold price has always been subject to some volatility but with a greater understanding of this valuable commodity, investors can use market knowledge to their advantage. Knowing when to buy gold, when to hold on to gold and when to sell gold is crucial to turning a profit but just what influences the gold price?

Gold Prices

You can find the historical prices of gold using our interactive gold chart below covering the last 24 hours (1D), previous seven days (1W) and for a period of one month, three months, six months, one year, two years, three years, five years and ten years.

Gold prices are one of the most complicated commodities to price as, unlike other assets, the price of gold is relative to more than just a typical production, demand and inventory algorithm. Even amateur investors can understand the correlation between traditional stock market data and the consequential shift in trading prices; however, because gold is effectively money, it’s price is also subject to additional influencers, namely:

  • Global inflation, particularly that of the U.S., which indicates a rising supply of money;
    price of gold mining
    Gold mining is a costly process and production is very responsive to market prices. Image via Khushie Singh (own work), Wikimedia.
  • The ‘indirect pricing’ of production costs for other commodities;
  • Activities of central banks including printing money and their trading of gold.
  • Real interest rates (interest rates compared to wages and inflation), particularly those in the U.S.
  • Trade and growth imbalances.

In addition, influencing factors can be a combination of psychology, speculation and, to an extent, market manipulation.

The costs of extracting what gold is known to be left in the earth’s crust is an expensive business as much of this precious metal is alloyed with other metals making it harder (and more costly) to extract pure gold. As a result, the production of gold is incredibly responsive to market prices; if the gold price per ounce is too low then production slows or ceases. In turn, this means less gold on the market which causes the price to rise.

gold prices uk
Gold is one of the rarest metals on earth making the price of gold an indicator of any economy. Image via James St. John, Flickr.

Over the last ten years, the gold price (whether this is in gold coins, gold bars or gold bullion) has risen from around $664 per ounce to around $1,220; that’s an increase of 83.73%. At the height of the recent market, the gold price per ounce reached $1,825 or increased by 174.85%. Investors who chose to liquidate their assets in August 2011 would have realised a large profit on their original gold investment; but, did many choose to do so?

Probably not and there is a good reason for this. Investing in gold, for many people, is not about turning immediate profits and constantly analysing markets to liquidate their assets. Gold is seen as a way of diversifying a portfolio to mitigate the risk of the kind of market exposure offered only by paper assets. For many, this kind of investment decision is about shoring up a pension or other future financial retirement annuity.

Historic gold prices, like other commodities, have followed wider economic trends as well as geo-political changes. Most significantly, as a form of money, the price of gold is strongly linked to the currency markets, notable the US Dollar. A weak US Dollar is often a precursor to a higher gold price whilst a strong US Dollar can indicate a fall in the price of gold.

Quite simply, gold is a much rarer metal than silver though silver is becoming more widely acknowledged as a diminishing precious metal which is causing the price of silver to rise. Silver investment is therefore being adopted by many investors due to the current low entry price point coupled with potential rate of growth.

At a simple supply and demand level, gold is one of the rarest elements on our planet. It is estimated that if all of the gold ever mined was melted down and stored in one place, it would only fill one Olympic sized swimming pool. The gold price per ounce reflects this scarcity in the same way that works by artists like Da Vinci and Picasso are valued; limited in supply but high in demand.

Ultimate Insider's Guide to Tax Efficient Gold and Silver

Here at Physical Gold, we are not financial advisers and cannot give you specific advice on the best time to buy and sell your gold, irrespective of the prevailing gold price per ounce. What we can do is support your decision to invest in, or liquidate, precious metals and get you the best price for your trade.

We can also provide you with the latest insights affecting gold prices in the UK with our market news, information and tips blog.

 

gold prices rare metal
Gold prices reflect that this precious metal is one of the rarest elements on earth.