Precious metal commodities are notoriously difficult to predict. There’s a lot of noise out there from both gold skeptics and gold bugs. But if you want to know where the price of gold is headed, there are a few factors that can give you an idea:
- How much gold is being mined or sold from reserves
- How much gold private investors and central banks are buying
Factors like inflation, stock market performance, interest rates, and bond yields all play a role, too, but as with so many commodities, supply and demand lie at the heart of the gold prices.
Who’s Buying Gold
The Russian central bank has been busy buying gold for the last ten years after a steep sell-off in the late 1990s and early 2000s. The Bank of Russia is serious about increasing its gold reserves and it’s been buying up domestically-mined gold through Russian commercial banks.
Indian consumers make India one of the world’s largest gold markets. Whereas gold investors in most parts of the world buy gold bars and gold coins, the vast majority of Indian gold buyers are rural consumers who buy gold bullion jewelry for both ceremonial and investment purposes. Indian wedding season and harvest festivals almost always drive gold prices up in the late summer and early fall. Gold bullion jewelry is available to gold investors anywhere in the world. In North America, Silver Gold Bull supplies gold investors a wide range of gold coins, gold bars, and gold bullion jewelry.
Back in 2017, the German central bank repatriated nearly $28 billion worth of gold it was storing in the Federal Reserve Bank of New York and the Banque de France. The transfer back to Frankfurt’s Bundesbank was completed three years early. The gold was in other central banks as a hedge against currency risks and essentially due to Cold War fears that it could fall under Soviet control. But the times have changed, and not only is Germany repatriating gold, private German investors pushed that country to become the biggest gold buyer in 2016.
Who’s Selling Gold
While it’s all been sold off now, back in 2016, the government of Canada wound down almost all of its gold reserves. Despite being a major global gold mining country, Canada did not have significant gold reserves, with only $100 million (USD) in gold reserves in 2015. Now it’s a negligible amount, with under 1 tonne held by the central bank of Canada. That also means that Canadian mined gold is almost all on the market, unlike Russian gold, most of which is quickly picked up by the central bank. The Royal Canadian Mint is also a major source of gold coins, easily available from online gold dealers in Canada like Silver Gold Bull.
You would expect a country experiencing hyper-inflation like Venezuela to be buying gold, but as the country has been running out of cash, it’s been selling its gold reserves to pay debts ever since the price of oil collapsed. Throughout both 2016 and 2017, Venezuela traded much of its gold for cash.
Who’s Hoarding Gold
Switzerland, The Netherlands, France, and Italy all have gold reserves among the largest in the world (as does Germany). France and Italy have large reserves and have been neither buying nor selling in large quantities for the last several years.
Central banks, jewelry consumers, and gold investors all impact gold prices. Before you start investing in gold, get the live price of gold today and compare prices with online gold dealers. As central banks and investors around the world increase or maintain their gold positions, it may be time you consider doing the same.