SUMMARY :

1) What influences the price of gold? 

 

The price of gold is influenced by a variety of economic, financial and geopolitical factors, each having a more or less direct impact on its value. 

 

      Economic factors 

The general state of the world economy strongly influences gold prices.  

- In times of robust economic growth, investors often favor stocks or bonds, resulting in a relative decline in interest in gold.  

- Conversely, during economic downturns or financial crises, gold plays the role of safe haven, leading to a significant increase in its price. 

 

      The geopolitical factors 

Geopolitical uncertainties such as armed conflicts, international tensions or major political instabilities generally lead to a rush towards safe assets known as “safe havens” like gold, thus contributing to an increase in prices. 

Historically, it can be observed that whenever tensions increase on the international scene, gold prices tend to rise. 

 

      Periods of inflation 

Inflation can be defined as a general and sustained increase in prices. In other words, inflation erodes the purchasing power of a currency. It follows that assets denominated in money lose their real value. This is also the case for savings accounts, certain shares or bonds.  

On the contrary, tangible assets such as gold or real estate will be less severely affected by this monetary erosion because their value is not directly linked to that of money. 

It can therefore be objectively estimated that, in the long term, gold is an excellent bulwark against inflation and an effective hedge against currency depreciation. Because when inflation rises, investors turn to gold to preserve their purchasing power, which stimulates demand and drives up prices. 

For example, during the 1970s, a decade of high inflation in the US, gold prices rose from about $35 to over $800 per ounce in 1980. 

 

      Monetary policies and interest rates 

Each country’s central banks (the US Federal Reserve, the European Central Bank or the Bank of Japan for example) have their own monetary policy. This is a set of measures taken to control the money supply and credit conditions in an economy.  

The main objective is often to ensure price stability and support economic growth. 

Among the instruments available to a central bank, the key interest rate is the most emblematic tool. By acting and modulating this rate, central banks influence the cost of credit, consumption, investment, as well as the behaviour of financial markets. 

However, the price of gold is also closely linked to these monetary decisions because the change in this key rate impacts: 

- The value of currencies, especially the US dollar (and therefore implicitly the value of gold, since denominated in dollars). 

- Inflation expectations. 

- The opportunity cost of holding gold. 

Low or negative rates make bonds and money market investments less attractive, increasing demand for gold which, although not yielding, becomes comparatively more attractive. 

At the same time, central banks also have their own policies for buying or selling gold, which strongly influences prices. Massive gold purchases by countries such as China or Russia in recent years have significantly impacted price dynamics. 

 

      Influence of institutional investors 

Large investment funds, ETFs (listed index funds) or hedge funds also influence the price of gold. Their strategy of massive investment or divestment can cause significant fluctuations in the price of gold on international markets. 

Gold-backed ETFs are experiencing an unprecedented period of growth in 2025, driven by an uncertain global environment and a greater search for security by investors. 

In the first quarter of 2025, gold-backed ETFs recorded net inflow of 226.5 tonnes or $21.1 billion, the highest level since early 2022. The United States dominated these flows with 133.8 tonnes, followed by Europe with 54.8 tonnes. 

2) What are the mechanisms behind the price of gold, and how is it set?

 

The price of gold fluctuates in real time, and is based on sophisticated financial mechanisms influenced by economic, geopolitical and technical factors. It is important for any investor or precious metals enthusiast to understand how the price of gold is set.

The price of gold is determined by two factors:

 

The spot market: The futures market:

The main international spot market is the London Fixing. This fixing is established twice a day by the LBMA (London Bullion Market Association) and establishes an official world reference.

This fixing is carried out by a select group of international banks (such as HSBC, UBS, Goldman Sachs...) who negotiate prices until an equilibrium is reached between immediate supply and demand.

These are standardized contracts traded on exchanges such as COMEX (New York), for delivery at a future date.

COMEX was founded in 1933 as an exchange specializing in energy and precious metals. It merged with the NYMEX, itself acquired by the Chicago Mercantile Exchange (CME) in August 2008.

The high volumes traded on these exchanges have a strong influence on the overall price of gold.

These markets also enable speculation on future price trends.

 

 

3) The evolution of the gold price over the last 20 years 

 

As shown in the chart below, gold prices have evolved very significantly over the past two decades, marked by distinct periods linked to major global economic events. 

      From 2000 to 2010: a steady increase 

In the early 2000s, gold prices were around $250 per ounce and at the end of 2010 they were close to $1,400 per ounce. During this decade, the price grew steadily, driven by several factors:  

The weakening of the dollar  

The gradual rise in global inflation, 

The global subprime financial crisis in 2007-2008 which saw gold become a popular haven for investors. 

 

      From 2011 to 2013: historical record and correction 

Amid continuing concerns about European sovereign debt and accommodative monetary policies in the US, gold reached a new record high in September 2011 (around $1920 an ounce).  

But, starting in 2012-2013, the price is experiencing a significant correction, falling to about $1,200 in 2013 due to the gradual global economic recovery and the renewed interest of investors in risky assets.