Gold (GC=F) April futures opened at $4,996.20 per troy ounce on Monday, down 1.3% from Friday’s close of $5,061.70. Gold prices fell in early trade, but rose to start the morning.
High oil prices remain a focus for gold traders. Brent crude (BZ=F) rose above $100 a barrel over the weekend, as oil shipments continued to be disrupted in the Middle East. The bottleneck is the Strait of Hormuz, a key road that has been largely closed to non-Iranian traffic since the fighting began. Before the war, it was estimated that 20 percent of the world’s oil went through waterways. President Trump wants to establish a coalition of allies to escort the ships in this way, but no country has publicly agreed to participate.
High oil prices increase costs for businesses and strain budgets for consumers. An extended conflict in Iran that keeps oil high could fuel inflation, limit growth, or both. These results complicate the Fed’s interest rate strategy at a time when multiple rate cuts are expected this year.
Pending higher interest rates raise yields on cash and fixed income assets, making gold look unattractive by comparison.
The opening price of gold futures on Monday was 1.3% lower than Friday’s close. Here’s a look at how the opening gold price has changed over the past week, month, and year:
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One week ago: -3.1%
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One month ago: +0.9%
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One year ago: +66.9%
Gold’s one-year gain was 95.6% in Jan. 29.
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The price of gold can be quoted in many ways because the precious metal is traded in different ways. The two major gold prices that investors should be aware of are current prices and gold futures prices.
Read more: How to invest in gold in 4 steps
The spot price of gold is the current market price per ounce of physical gold as a raw material, sometimes called spot gold. Gold ETFs backed by physical gold assets typically track the spot price of gold.
The spot price is lower than what you would pay to buy gold coins, bullion, or jewelry, as your total price will include a markup called the gold premium that includes refining, marketing, dealer overhead, and profit. The spot price is the same as the wholesale price, and the spot price plus the gold premium is the wholesale price.
Read more: Thinking of buying gold? Here’s what investors should watch.
Gold futures are contracts that authorize the sale of gold at a certain price at a future date. These contracts are exchangeable and more liquid than physical gold. They pay on or before the contract expiration date, either in cash or on delivery. A cash settlement in finance involves paying the profit or loss of a contract in cash. Delivery means that the seller sends physical gold to the buyer at the contract price.
Supply and demand determine gold spot prices and gold futures prices. Factors that influence gold supply and demand include:
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Geopolitical events
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Central bank buying trends
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Inflation
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Interest rates
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Mining production
Read more: Who decides what gold is? How prices are determined.
Whether you’re tracking the price of gold from last month or last year, the gold price chart below shows a strong rise in the price of the precious metal.
Read more: Alternatives to gold? How to invest in silver, platinum, and palladium.
