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What Key Variables Are Impacting Gold Prices?

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Gold price performance

Gold prices are holding more or less steady in April. The SPDR Gold Trust ETF (GLD), which tracks the movement of gold prices, was trading at $115.33 on April 27, almost flat compared to the April 1 value of $115.60.

However, there’s been a lot of sideways movement in the gold market. Gold prices were trading at $1,200 per ounce on April 27 compared to $1,197 per ounce on April 1. They reached a high of $1,211 per ounce on April 7 and a low of $1,183 per ounce on April 24.

The VanEck Vectors Gold Miners ETF (GDX) tracks the movement of large and intermediate gold stocks. GDX was up 2.9% in the month of April.

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Gold indicators

Gold prices are impacted by a host of variables. In this series, we’ll look at the following factors that investors can track to get a sense of the direction of gold prices.

  • the macroeconomic outlook for the United States and other world economies
  • the performance of alternative assets to the US dollar
  • interest rates
  • gold imports by China and India
  • gold ETF holdings
  • inflation expectations

We’ll also look at the impact of US data on the dollar and gold prices, and we’ll look at the influence of international data. Then we’ll discuss factors such as the US labor market and inflation expectations. These are the most important considerations the Fed reviews before deciding on the quantum and timing of rate hikes. The timing of the Fed rate hike expectation has been the single most important variable impacting gold prices lately.

Get a holistic view

Most of these indicators are published monthly, while others are published weekly and quarterly. Although strongly correlated, these indicators are subject to divergences and short-term statistical noise. The best approach to getting a full picture is to look at these indicators as a whole rather than individually.

These indicators should point you in the same direction as gold prices. They’ll also suggest movements in the share prices of companies such as Goldcorp (GG), Royal Gold (RGLD), Silver Wheaton Corp. (SLW), and Kinross Gold Corporation (KGC). Combined, these companies make up 19.1% of GDX.

The iShares U.S. Basic Materials ETF (IYM) is also a good way to invest in US basic materials stocks. RGLD forms 0.69% of its holdings.

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