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Gold is one of the most valuable commodities in the world today. It is theore not surprising to know that people rely on this commodity as a means of exchange and for storage of wealth. Financial markets worldwide place great emphasis on the trading of this product among investors. There are various determinants of the spot price of gold . These factors can influence either rise or fall in the price that people charge for this commodity on the market. In most markets, the figure is set twice in each trading day.

Most governments have striven for the establishment of liberal markets. These are markets where the prices of various commodities are determined by the forces of demand and supply. Being the largest economy in the world, the USA has a great impact on the prices of most items in the world today.

Conversely, the changes in the US price level have an important impact on the gold spot price. Research has shown that this impact is usually positive which explains the reason why it is relied upon as a guard against inflation in most economies.

For investors outside the borders of the USA, dollar depreciation determines how the spot price of gold is calculated. Usually, a cycle exists between the prices and inflation rates in this country. Below is the explanation for this.

It has been a practice of investors to purchase gold reserves and hold them. For those outside the USA, the effects of this will depend on a number of factors such as when they purchase the commodity and the length of time over which they hold onto it. Profits gained depend on the nominal amount that will have to be paid for the products.

People commonly purchase reserves of large amounts of gold. This is also common for investors outside of the USA. However, it will have varying effects depending on the time at which they purchase the commodity, the length of time over which they keep it in their reserves. The nominal amount to be paid for the products will be among the major determinants of the price.

Jewelers are among the main consumers of this metal. They rely on it for the production of ornamental items such as watches, bangles and other items. Their products are very valuable and theore their demand is among the major factors that will determine how much suppliers will charge for it.

Politicians have a major impact on the development of the countries they live in.

Their positions of power put them in a favorable position to influence the policies affecting different sectors of the economy. The central bank in any country usually has the responsibility of determining the amount of gold reserves that each country will keep. Politicians have influence on these policies and theore, politics will influence the decisions made and the amount of commodity available for trading.

Environmental factors also have their effects on the prices and changes seen concerning this product. This is especially clear in countries that depend on agriculture as the major economic activity. Using various methods, professionals can be able to forecast the future conditions in the weather and if they will be favorable for investment. These forecasts will determine the changes in demand and supply of this commodity on the market and the amount that people will have to pay to acquire it.

Holding onto gold reserves earns investors interest at a variable rate. These rates are important in determination of the spot price of gold. The trend that most people are familiar with is that the amount they pay for the commodity is inverse to the interest rates they have to pay. An analysis of this trend reveals that this is caused by the fact that changes in interest rates are associated with inflation concerns and devaluation of the dollar. However, since interest rates may rise because of other factors, the relationship may go inverse to the expectations of market players.