April gold futures (GC=F) opened at $4,996.20 per troy ounce on Monday, down 1.3% from Friday’s closing price of $5,061.70. The price of gold fell in early trading, but rose in the early morning.
High oil prices remain the focus for gold traders. Brent crude oil (BZ=F) rose above $100 a barrel over the weekend as oil shipping remains disrupted in the Middle East. The choke point is the Strait of Hormuz, a vital waterway that has been largely closed to non-Iranian traffic since the fighting began. Before the war, it was estimated that 20% of the world’s oil supply passed through this waterway. President Trump wants to establish a coalition of allies to escort the ships through the passage, but no country has publicly agreed to participate.
High oil prices increase costs for businesses and tighten consumer budgets. A prolonged conflict with Iran that keeps oil high could fuel inflation, limit growth, or both. These results complicate the Federal Reserve’s interest rate strategy at a time when many were expecting rate cuts this year.
Persistently high interest rates increase returns on cash and fixed income assets, making gold look less attractive by comparison.
The opening price of gold futures on Monday was 1.3% lower than Friday’s close. 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: -3.1%
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A month ago: +0.9%
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One year ago: +66.9%
Gold’s annual gain was 95.6% on January 29.
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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.
More information: How to invest in gold in 4 steps
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.
More information: Are you thinking of buying gold? Here’s what investors need to keep in mind.
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
More information: Who decides how much gold is worth? How prices are determined.
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.
More information: Alternatives to gold? How to invest in silver, platinum and palladium.