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How Are Gold Prices Determined: Did You Know?

Apr 21, 2021

Over the past two decades, gold's prices continued to climb to historic heights. Gold generally carries an inverse relationship to the valuation of the U.S. dollar, meaning as the value of the dollar declines, the price of gold begins to climb. This makes gold an excellent hedge against inflation, which is why many consider gold to be a safe haven asset.

For this reason, as uncertainties around the globe put pressure on markets, many people looked at gold as a form of wealth protection. Like everything else, gold is susceptible to the fundamental economic principle of supply and demand. Though jewelry accounts for 50% of all gold demand, tech in certain industries like the medical industry, are becoming reliant on gold for their manufacturing needs.

As a finite resource, gold is becoming increasingly more difficult to obtain. Mining operations must dig deeper than ever before to access sources of quality gold. As the supply of gold becomes less fruitful and more expensive to obtain, the price could rise. Central banks also play a role in determining the price of gold. As central banks diversify their holdings away from paper currencies and into gold, the price is predicted to rise.

Understanding what determines the price of gold is important when considering how to diversify your portfolio with precious metals. If you would like to learn more about why gold should be a part of your portfolio, call the number on your screen or click the link below. As America's Gold Authority, U.S. Money Reserve is here to help you every step of the way.

Check out the Did you Know playlist on our YouTube page to see more interesting videos about gold.

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