Gold futures () opened at $4,001 an ounce on Monday, up 0.5% from Friday’s close of $3,982.20. The price of gold has remained between $3,910 and $4,040 since October 28.
Over the weekend, China announced a change in its tax policy on gold. Previously, the country allowed retailers to offset a 13% value-added tax when selling gold purchased on the Shanghai Gold Exchange and Shanghai Futures Exchange. The new policy reduces compensation from 13% to 6% for some retailers. Those affected are jewelry retailers and sellers who are not members of the exchanges. Chinese jewelry stock prices fell after the change was announced.
Some analysts have predicted that the tax change will result in higher retail prices for gold jewelry in China and possibly around the world.
The opening price of gold futures on Monday is up 0.5% from Friday’s close of $3,982.20. Below is how the opening price of gold has changed compared to the past week, month and year:
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A week ago: -1.5%
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A month ago: +3.8%
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One year ago: +45.7%
Last week, the price of gold futures rose 50.5% from a year ago.
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The price of gold can be quoted in multiple ways because the precious metal is traded in different ways. The two main gold prices that investors should be aware of are spot prices and gold futures prices.
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The gold spot price is the current market price per ounce of physical gold as a commodity, sometimes called spot gold. Gold ETFs that are backed by physical gold assets generally track the spot price of gold.
The spot price is lower than what you would pay to buy gold coins, bars, or jewelry, as your total price will include a margin called the gold premium that covers refining, marketing, dealer overhead, and profit. The spot price is more like a wholesale price, and the spot price plus the gold premium is the retail price.
Gold futures are contracts that call for a transaction in gold at a specific price at a future date. These contracts are traded on the exchange and are more liquid than physical gold. They are settled on or before the contract expiration date, either economically or by delivery. A cash settlement involves paying the contract profit or loss in cash. Delivery means that the seller sends physical gold to the buyer for the contracted price.
Supply and demand determine gold spot prices and gold futures prices. Factors that influence the supply and demand of gold include:
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Geopolitical events
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Central bank purchasing trends
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Inflation
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Interest rates
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Mining production
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Whether you are following the price of gold from last month or last year, the gold price chart below shows the constant rise in value of the precious metal.