The Gold price is determined by supply and demand from the market. In order to make a good prediction of the gold price, it is important to know which factors influence supply and demand. 

What is the gold price?

When it comes to the price of gold, it is influenced by various factors such as economic and political developments, inflation, the value of currencies and the demand for gold as an investment and as a piece of jewelry. The gold price is set daily by the London Bullion Market Association (LBMA), which publishes the "London fix" as the reference price for global gold trading.

The Gold price is usually expressed in the U.S. unit of weight troy ounces, which is 31,103 grams. The following rates are commonly used.

• Kitco course;  
  This is the course that is adjusted to the current situation at any time of the day. This shows the prices in both dollars and euros. The big advantage of this course is that it is visible to everyone.
• Reuters;
  This rate is widely used by larger banks and smelters. This is a leading gold price with the disadvantage that this price is not visible to everyone.
• London Gold Fixing;
  This is a rate that is adjusted twice a day, at 10:30 and 15:00 (GMT). This rate has been around since 1919 and is determined by the five members of the London Gold Pool. It includes the following banks: Scotia-Mocatta, Barclays Capital, Deutsche Bank, HSBC and Société Generale.

Supply and demand of gold

Thus, the price of gold is determined by the supply and demand for both physical and "paper" gold. 

Here we discuss where the supply and demand come from and what factors influence the supply and demand of gold.

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• Industrial: Gold is used in dentistry in electronics for smartphones and computers, for example. It is also used in the aerospace industry.  
• Central banks: Central banks have traditionally owned large amounts of gold. In the past, currencies such as the guilder, the pound and the dollar were backed by gold. Despite the fact that we now have a fiat money system where this is no longer the case, central banks still hold gold. For example, the Dutch Central Bank (DNB) writes on its website that they hold gold as a reserve and as an anchor of trust. We see that there are many countries that are expanding their gold reserves in recent years, which has a positive effect on the gold price.  
• Investors: gold is also increasingly used in the investment portfolio. On the one hand, gold is held as a safe, low-risk investment or as a hedge against inflation. On the other hand, just purely for the return. They also invest in gold through the trading of paper gold (etf's, futures, etc). 

Supply of gold

•  Gold production and gold discoveries: the production of gold allows more gold to be brought to the market. This is an intensive process, so it is not a major threat to the gold price in the short term. In addition, it is becoming increasingly difficult to mine gold, as the more simple mining sites have already been exhausted. One must also take into account that with a lower gold price it becomes less interesting/profitable to mine gold, this can have an inhibiting effect on a decrease in the good price. Of course, this is also the case the other way around.
• Existing gold: in addition to the production of gold, there is a lot of gold in circulation. A large part of this is processed into jewelry. In bad economic times, people may be forced to sell their gold. Gold is also used in industry, for example in electronics. This gold is often recycled again. 

The various factors that can affect the supply and demand for gold are described below.

• economy;
• exchange rate of the dollar;
• political turmoil;
• inflation (currency depreciation);
• government.

Economy; The economic situation is essential for the demand for gold. For a long period of time, gold has shown a negative correlation with the stock markets. Despite the fact that this negative correlation was released for a period in 2011, we can say that the more uncertainty there is about the economy, the more it seeks refuge in gold. 

Dollar exchange rate; The price of gold is expressed in dollars. As a result, the dollar exchange rate obviously has a major influence on the gold rate. If the dollar strengthens, gold will be worth less in euros.

Political unrest; Gold is seen as a safe haven. A stable factor in times of turmoil. The trust that gold has created over the past centuries ensures that gold is a refuge in times of political turmoil. A recent example of this is the rise in the price of gold after the outbreak of the war in Ukraine. 

Inflation; (currency depreciation); Rising inflation generally leads to an increase in demand for gold, as gold is seen as stable in value. 

Government; The government could exert a major influence on the price of gold.

At the moment, gold is VAT-free. If the government were to choose to apply a VAT rate to gold, this would have major consequences for the gold price. On the silver, there is already a visible interference from the government.

Finally, we cannot avoid mentioning that more and more critics are talking about a manipulation of the gold market by the larger players in the market. The bank JP Morgan was even sentenced to a fine of 920 billion dollars in 2020 for manipulating the gold market through "spoofing" or placing fake orders.