June gold futures (GC=F) opened at $4,648.60 per troy ounce on Monday, down 0.7% from Thursday’s closing price of $4,679.70. The price of gold rose above $4,700 in early trading. At 7 am ET, the price of gold was $4,720.
Gold rallied Monday morning after a positive jobs report on Friday and mixed news on the Iran war over the weekend. The U.S. economy added 178,000 jobs in March, the largest monthly increase in nonfarm payrolls in more than a year. The positive report likely reduces pressure on the Federal Reserve to lower interest rates.
Meanwhile, President Trump renewed threats against Iran as diplomatic efforts to end the war continue. The US threats involved attacks on Iran’s power plants and bridges if Tehran did not agree to reopen the Strait of Hormuz. Previously, the waterway carried 20% of the world’s oil supply. Its closure has largely contributed to the rise in oil prices. Meanwhile, Iran has confirmed receipt of a ceasefire proposal from Pakistan.
Sustained higher oil prices, coupled with the recovery in the US labor market, may translate into persistently high interest rates. High borrowing costs suppress demand and the price of gold because the yellow metal does not pay interest.
The opening price of gold futures on Monday was 0.7% lower than Thursday’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: +3.7%
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A month ago: -9.2%
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One year ago: +49.4%
Gold’s year-on-year growth 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 on 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.
Tim Manni Edited this article.