Understanding Gold Prices in USD: What Makes It Fluctuate?

gold prices usd
September 26, 2023
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Few resources have been coveted throughout history more than gold. Easter Europeans used it for decoration, Egyptians used it for coinage, and even today, many investors take an interest in gold.

Maybe you're doing an internet search for terms like "gold prices usd," "gold prices in usd," or "gold price fluctuations" in an attempt to understand what causes the price of gold to change. After all, gold is an investment, and all investments carry some risk.

So how can you understand your investment better?

It starts here with our guide. Keep reading and we will explain the correlation between gold prices and USD.

Factors That Affect Gold Prices in USD

There is no singular factor that affects the price of gold. Instead, gold prices in USD are affected by multiple factors: supply and demand, the central bank, interest rates, inflation, and EFTs.

Supply and Demand

The first major factor affecting gold prices is supply and demand.

Gold isn't a one-time consumable. The majority of the world ever mined is still somewhere around the world. Plus, even more gold is constantly mined.

That means the price of gold should, in theory, decrease due to supply. However, that doesn't happen with gold.

So what makes gold different?

For one, gold is constantly in demand. The number of people worldwide who want to buy it is constantly on the rise.

Almost half of all gold mined is for jewelry.  However, once used for jewelry, the gold is effectively taken off the market-typically for at least a few years, if not much longer.

Others are interested in gold as an investment.

Regardless of the reason for their interest, if the demand is higher than the supply, the price of gold will rise. If the inverse is true, the price of gold will fall.

Central Banks

A central bank is a public institution that is in charge of implementing monetary policy in a specific country. They also manage the currency of a country and control its supply.

These policies can influence the price of gold.

Central banks can also buy or sell gold. Why would they purchase gold? They see it as a safe haven against volatility since it tends to hold its value.

Much like an individual investor, a central bank may buy gold to diversify. This can happen even in emerging markets, and many countries accumulate gold.

While no country is currently using the gold standard, gold is still an important asset to their economies.

Every country has its own central bank. In the U.S., the central bank is The Federal Reserve, which is headquartered in Washington, D.C. The Federal Reserve has been the central banking system of the U.S. since 1913.

Interest Rates

The price of gold can also be affected by interest rates. Aside from price depreciation or appreciation, gold does not offer any return.

When interest rates rise, gold loses favor over interest-bearing securities. Likewise, when interest rates lower, gold often becomes more attractive to investors.

Who determines interest rates? That goes back to the central banks. In the U.S., the Federal Open Market Committee (FOMC) meets several times a year to discuss monetary policy and interest rates.


Inflation is the overall rise in prices across an economy. When inflation rises, money doesn't go as far as it used to. As inflation rises, purchasing power decreases.

That's where many investors turn to gold. Due to its rarity and history of reliability, when inflation hits and there is economic uncertainty, gold prices tend to increase, due to increased interest in gold.

Investors tend to become worried about losing the value of their stocks and bonds, so they may turn to other assets such as gold to help preserve their wealth. As a result, the price is increased.

When the U.S. dollar is strong, the price of gold tends to be lower. However, when the USD is weak, it is likely to drive the price of gold up. More gold can be purchased when the USD is weaker.

Many factors can cause inflation. Most recently, various market problems were caused in the U.S. by the COVID-19 pandemic. That, compounded with a tightening labor market, led to a spike in inflation after 2020.


ETFs can also affect the price of gold. An ETF is an exchange-traded fund.

These gold EFT funds allow investors to purchase gold without buying mining stocks. These ETFs are traded on a stock exchange. When an investor buys into a gold ETF, they are effectively buying a portion of the gold held by that fund.

There are a few major gold ETFs. A few examples include iShares (IAUM), Invesco DB Precious Metals Fund (DBP), and SPDR Gold Trust (GLD).

Gold ETFs can be a more affordable and easier way to invest in gold, without purchasing the physical commodity (and trying to store and safekeep it). Gold ETFs are highly liquid, allowing you to buy and sell them quickly. They can also be used to diversify your portfolio, helping you spread your risk.

Gold prices and gold ETFs are a sort of "chicken or egg" scenario. Gold ETFs reflect the price of gold. However, if more investors invest in a gold ETF, then they are effectively buying a share of gold-which in turn may increase the gold price.

Aside from ETFs, there are other gold stocks you can buy. Take a look at those if you want to further diversify.

Get More Gold Trading Advice

When it comes to understanding "gold prices in USD" and the connection between gold and the U.S. dollar, there are multiple factors that come into play. The popularity of EFTs, economic policies set by The Federal Reserve, supply and demand, and more all determine how popular gold is.

One thing is for certain, though: gold is always popular, and is always a great way to diversify your portfolio.

There's no need to scour the net for advice on gold. For starters, check out our monthly reports on gold.

For more advice on gold trading, join our public Telegram channel.

The price of gold on the market can go high or low, seemingly on a whim. Get your guide to the fluctuating gold prices USD here.

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