Understanding the factors that influence the cost of gold is crutial prior to making an investment in the precious metal. Essential is to be conscious of the key differences in the supply and need for gold when compared with other investments such as commodities, stocks and bonds.Another factor to keep in mind; gold isn’t the only precious metal to consider when creating this type of investment. Silver, Platinum and Palladium are also highly sought-after as investment vehicles, offer similar fundamentals to gold, but each have their own unique characteristics as an investment.Factors Influencing the Price of Gold BullionThe value in a gold coin or gold bullion can be found in its precious metal content. While gold is pretty to look at in just about any form, when desired for investment purposes its visual appeal is not usually a consideration. Because of this, the value of gold bullion is tied straight to the market price for gold, and will fluctuate because the market moves, just like stocks, bonds and commodities.Valutazione oro usatoHow you can Measure the Cost of GoldWhen quoting the price of gold, most business reports will show the price per troy ounce in US dollars. If you are following a market from outside the US, make sure to convert this price to your home currency, and know that one troy ounce is equivalent to about 31.1 grams.Also observe that the price quoted available on the market is always for pure gold. Most jewelry far less than pure (usually between 40-75%), bullion and coins however, are often fairly high purities (above 90%).By having an understanding of the mechanics behind the cost of a physical sample of gold, you can begin to look at the market forces that create the wide daily swings in price. They are listed in order of their impact on the daily price of gold.1. Macroeconomic DataProbably the most influential metric around the price of gold may be the daily economic information appearing out of the worlds markets. Gold has historically always been a ”safe haven” type of investment. Like real estate and cash, it’s a place to place your money if things aren’t looking great elsewhere. When money is pulled out from the stock market it generally flows towards these kinds of investments, however in 2008 when the stock market and also the real estate market experienced simultaneous crashes, gold appeared like the only safe play and, consequently, began its dramatic gains in price.2. Inflation PressureInflation is the theory that more than time, the value of money will always go down as prices increase. While the average price of a house isn’t $40,000 enjoy it was in 1975, the number of gold bars it might take to buy the same home is pretty consistent: $40,000 price of gold in 1975 could be worth just a little over $310,000 today.Which means that no matter what the market is for gold, over time it’s always better than holding cash without earning any interest on it. While gold doesn’t pay interest, its price does generally track the rate of inflation or better.3. Demand and supply of GoldDemand and supply is the main drive of market pricing behind most commodities. While the gold price is much more complex than this basic formula, these factors do come in to play.The availability of gold is basically dependent on its price, as the cost to mine it has become so high. It was once quite easy to prospect and mine for gold, with plenty of stories from the gold rush of hitting the mother lode. Nowadays, it’s much more difficult to extract gold in big amounts and requires expensive equipment and technology. Also, since gold doesn’t really get ”used up” or consumed the way other commodities do, there is always a large reserve of gold regardless of supply. So unlike other commodities, the availability of gold will probably continue to be more reactive to its price rather than have a direct effect on it.The demand side is similarly consistent. Because the price of gold drops, its demand in the use of jewelry increases (as jewelry is a discretionary spending item), however the investment demand for gold will normally drop as prices move ahead a downward trend. The reverse is true, obviously if prices rise: jewelry interest in gold drops, and investment demand increases.Future of Gold PricesTurn to the economy and also the rate of inflation as the most likely indicators of gold price in the future. Another big recession or perhaps a sudden increase in the level of inflation might cause gold to create another big run up. Similarly, if things continue to improve within the global economy and inflation remains in check, gold prices will likely remain fairly stagnant and could even drop a bit more.