What Hikes Gold Price

Gold prices in most African countries are driven by three main factors, that is, demand and supply, investors, and economic instability. Recent studies show that these forces are definitely what hikes prices of gold in most African countries.

Demand and supply

Potential buyers of gold and its products are constantly on the rise. You may wonder why gold prices increases despite the fact that gold is not consumed. Well, the increasing gold demand provides you with a clue.

Jewelry demand tend to increase with increase in gold prices and fall with the fall of gold prices. This means that demand influence the prices of gold. Besides, few people use jewelry as a form of exchange. In other words, some people buy certain products and instead of paying through cash, they offer jewelry.

All gold ever mined still exist to date. And more good is mined each day. So, supply of gold also affects gold prices.

Traditionally, there is sudden increase in jewelry demand during weddings and festive seasons in most countries. Because of this, prices of gold goes higher than normal.

There are other factors as well, that come into play in gold demand. These factors, according to recent studies, influence demand foe gold.

One, income levels. Demand for gold increases with increase in income earned by individuals.

If for instance, income per capita increases by 2% in a country, gold demand also increases by 2%.

Secondly, gold price levels influence demand for gold. If gold price level increases by 1%, there may be a drop in gold demand by 0.5%.

Inflation

When inflation happens to occur, the value of currency tends to go down. Because of this, people hold cash in form of gold during inflation period. If the period prolongs, gold prices becomes higher. This is because at this point, people use gold to hedge against inflation.

Poor economy

During economic crisis, good prices tend to go higher. Investors buy gold to protect themselves during economic crisis. Because of this, investors will tend to buy more gold when they think the economy is doing poorly.

Gold prices therefore, reveal that most investors know whether the economy is healthy or unhealthy.

Protection against uncertainties

Investors sometimes buy gold in order to protect themselves from volatility or uncertainty.

For this reason, most investors view gold as an asset they can buy when other assets are losing their value in the market.

Because of this, investors buy gold both in good and bad times; whether the economy is good or in recession.

Good monsoons

Demand for gold in rural areas play an important role in gold prices. Rural demand for gold is dependent on monsoon.

When yields are great, farmers tend to buy gold to increase assets. This increases prices of gold. On the other hand, when yields are poor, prices of gold go down because farmers sell gold to generate funds.

Therefore, monsoons play a crucial role i gold consumption.