Why Is the Price of Gold Falling? Here Are 5 Key Factors

Jakarta, Pintu News – The price of gold, which has been known as a safe haven asset, does not always go up all the time. In some periods, gold prices have declined, reflecting the dynamics of the global market.

Declining gold prices are often a concern for investors, especially those who hold physical gold or precious metals as part of a portfolio. This article reviews the five main factors that can cause gold prices to fall, with short but concise explanations and based on the latest economic data and trends.

1. Global Interest Rate Rise

One of the most important factors that can depress gold prices is interest rate hikes by central banks such as the Federal Reserve in the United States. When interest rates rise, the yields on bonds and other interest-based instruments become more attractive to investors, making gold less attractive as an interest-free asset. As a result, demand for gold tends to fall and gold prices may correct.

Rising interest rates also strengthen the currency of the country that raises them, such as the US dollar. Since gold is priced in US dollars, a strengthening dollar makes gold relatively more expensive for holders of other currencies, so global demand may decrease and push prices down.

2. US Dollar Exchange Rate Strengthening

Gold prices are significantly affected by movements in the US dollar as the commodity is traded in dollars in the international market. When the dollar strengthens against other currencies, global investors’ purchasing power for gold decreases resulting in weaker demand and lower gold prices. This phenomenon is seen when the US dollar index is at high levels due to tight monetary policy.

Also read: What is 75% Gold Grade?

The strengthening of the dollar also often coincides with expectations of rising interest rates, so these two factors reinforce the pressure on gold prices. Investors looking for returns usually turn to dollar-based assets such as Treasury bonds, so the demand for gold as an alternative asset decreases.

3. Decline in Industrial Demand

Part of the demand for gold comes from the industrial sector, including electronics and jewelry. When economic growth slows down, industrial demand for gold may decline as manufacturers and consumers reduce purchases of luxury goods or production components. This decrease in demand puts downward pressure on gold prices.

Moreover, demand for gold jewelry in large markets such as China and India may also decline when gold prices are high or domestic economic conditions are weak. China and India are two of the world’s largest gold consumers, and changes in buying behavior in these regions affect global gold prices.

4. Investor Portfolio Rebalancing

Institutional investors and asset managers often rebalance portfolios to maintain an ideal asset allocation. If the stock market or other risky instruments are performing strongly, investors may reduce the gold portion to increase exposure to assets that provide higher returns. This massive selling of gold may cause the price to drop.

Read also: How much is 1 gram of gold pawned? Here’s the full explanation!

In addition, when inflation expectations fall or stabilize, investors’ need for safe haven assets such as gold decreases, so the portion of gold in the portfolio is reduced. This kind of rebalancing is one of the reasons why gold prices fluctuate in the short term.

5. Positive Economic Data

Economic data that shows strong growth, such as low unemployment rates, high GDP growth, or encouraging retail sales data, can make investors more optimistic about risky assets. When confidence in resilient economic conditions increases, investors tend to reduce their allocation to gold and switch to stocks or other assets that have the potential to provide higher returns.

Strong economic conditions also sharply lower inflation expectations, making one of the main reasons investors hold gold – as a hedge against inflation – less relevant. It is this decline in demand for gold as a safe haven that is helping to depress gold prices.

Conclusion

A decline in gold prices can be triggered by a variety of factors, including rising interest rates, a strengthening US dollar, declining industrial demand, investors’ portfolio rebalancing strategies, as well as strong economic data. Understanding these factors is important for precious metals investors to make more informed investment decisions. Gold price movements reflect the dynamics of the global economy, so keeping up with macro developments can help in devising effective strategies to deal with gold price fluctuations.

Gold-Based Crypto: When Physical Assets Meet Crypto Technology

As blockchain technology develops, gold can now be owned not only in physical form such as jewelry or bars, but also in digital form through gold-based crypto assets.

One of the most popular is Tether Gold (XAUt), a physical gold-backed ERC-20-based stablecoin, where 1 token represents 1 troy ounce of pure gold. The gold is stored in vaults in Switzerland and each token is directly linked to certified gold bullion. The system uses automated algorithms to efficiently manage the allocation of gold and Ethereum addresses.

XAUt tokens are available and traded on various crypto exchanges. XAUt is also an attractive alternative for those looking to hedge against inflation or global economic uncertainty, while remaining within the digital asset ecosystem.

Follow us on Google News to stay up to date with the latest in crypto and blockchain technology. Check Bitcoin price, usdt to idr and tokenized nvidia stock price via Pintu Market.

Enjoy an easy and secure crypto trading and crypto gold investment experience by downloading the Pintu crypto app via Play Store or App Store now. Also, experience web trading with advanced trading tools such as pro charting, various order types, and portfolio tracker only at Pintu Pro.

*Disclaimer

This content aims to enrich readers’ information. Pintu collects this information from various relevant sources and is not influenced by outside parties. Note that an asset’s past performance does not determine its projected future performance. Crypto trading activities are subject to high risk and volatility, always do your own research and use cold hard cash before investing. All activities of buying and selling Bitcoin and other crypto asset investments are the responsibility of the reader.

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• Featured Image: Money Metals