Now a day’s economies of all countries whether underdeveloped, developing as well developed experiencing inflation. Inflation or unrelenting rising prices are major problem at present world. Due to this gold prices are also going up day by day. There are few factors which are affecting the gold prices.

Modifications in exchange rate

U.S. dollar exchange rate is generally cheering the increase in world gold prices. This is because shareholders choose to put their dollar on the market and then procure the gold with the expectation that gold can look after the value of their possessions and property. For instance, whereas the values of dollar exchange rate against other currencies continue to decline, the gold prices carry on rising.

Interest rate

Whilst interest rate rises, peoples tend to keep money on deposit superior to gold which does not earn interest. This will grounds pressure on the gold price. On the other hand, when interest rates fall down, the gold price will be expected to rise. In assumption, if the short-term interest rate rises, your gold fell. In Indonesia, this theory does not always work.

Demand and supply

A case in point of this demand and supply of gold is similar to the incident took place in mid-1980. At that time, onward sales by mining companies are always held responsible for the increase of gold prices. Even though in business term, the mining company’s real action and manner is logical. By making onward sales when gold went up, they could protect the mine productivity price at a reasonably smart price. So demand and supply also influence in the gold prices

Political condition of the world

Increase of gold prices in the end of 2002 and early 2003 came about as a consequence of the attack to Iraq by the U.S. command associates. Market contributors moved from money market investment and the stock market to gold investment, causing the demand for gold jumped so sharply.

The worldwide economic condition

Seeing that worldwide economic situation enhanced, the call for gold is likely to go up. Nevertheless, the major perceptive industry to be prejudiced intensely is jewelry industry. Roughly 80 percent of the total supply of gold has been used by jewelry industry. Recession had prejudiced the jewelry demand in the year 1982-1983, because at the same time, the gold prices also went up. With gold, investors got a ideal guard against the turn down in buying power. On the years 1978-1980 the price was booming. While inflation in the U.S. increased from 4 percent to 14 percent, the gold prices went up three-fold.

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