Gold prices reflect the marketplace’s underlying value attributable to gold as determined by futures (derivatives) securities. Because gold is a resource commodity, its value is inherently volatile and, according to history, tends to trade in “mania” phases.
Gold prices in recent history have been quite strong, rising for the better part of a decade. Currently, gold prices have been experiencing a large price consolidation and many financial market participants feel that the commodity is about done its current price cycle.
Gold prices are influenced by a number of factors, including the value of the U.S. dollar, geopolitical events, and the perception among futures traders regarding global demand and supply for physical gold.
Strength in gold prices often reflects a view in the marketplace that there is uncertainty in the world. Their volatility makes them difficult to forecast and predict their direction. Because of this, the underlying commodity represents a risk-capital asset.