Gold prices in USA are highly sensitive to the macroeconomic changes in American and international economy. Such factors may or may not directly influence the economic vulnerability but due to certain predefined correlation, gold prices in USA are affected. Following is a brief list of the underlying factors:-
Wall Street Activity
Gold prices in USA are highly dependent upon the fear and confidence of international investors in Wall Street. Divergent to the common perception, the market pattern is completely opposite. For instance, when foreign investors find a risk averse situation (fear), the prices receive a boost, whereas in risk taking conditions when investors show confidence, gold prices get a dip. Gold prices in USA have started reacting against activity in other influential stock markets as well such as London Stock Exchange etc.
Global Currencies and US dollar
US dollar is a benchmark of trading in currencies worldwide. The impact on gold prices is observed against major currencies i.e., European Euro, Japanese Yen, British Pound, Swiss Franc, Canadian Dollar, Australian Dollar, New Zealand Dollar and South African Rand. When these currencies start appreciating against dollar, gold prices in USA also get a boost on pro rata basis. Opposite trend may be observed in case of depreciation of currencies against US dollar. Certainly the same events have occurred in the past and available for ready references.US dollar itself significantly affects the gold prices in USA.Increase in value of the US dollar decreases the gold prices .
International Financial Crisis
When major economies fall in to the financial or debt crisis, gold prices react in an instant manner. Due to foremost economic crisis, gold prices are increased on noticeable extent. Live examples of such scenario may be quoted as 2008’s USA real estate financial crisis, Euro zone crisis, Japan Asset Bubble Crisis, and Asian Debt Crisis. During the time period of financial crisis, inflation broadly gets increased and thus oil and gold prices are fluctuated.
In general discussion it may be specified that international climate including disasters, weather vulnerability, and storms do not directly affect the gold prices until and unless market ramifications are observed. It is hence an indirect process. For instance, the international climate affects the stock market activity and the change in market activity affects the gold price. It is considered as an affecting factor because it is the basic rational due to which fluctuations may be seen. In recent past, the sandy destroyed the banking system of several parts of USA and created uncertainty among the international stakeholders. The ultimate effect was embossed on the economy, stock market, and commodity prices including gold.
International Balance of Payments
Balance of payments play an important role in international market as it does in the case of local economies. Sudden fluctuation in balance of payments induces abnormal economic activity in the hose that consequently affects the gold prices in international market. For instance, imports of USA have direct impact on international economy and any impromptu movement creates a bustle in global economy including oil and gold prices.This shows that international balance of payments also affects the gold prices in USA.