Looking to Invest in Gold? Consider These Factors Affecting the Metal at a Given Time

By Lynnet Okumu / Published July 4, 2022 | 11:34 am




KEY POINTS

With the COVID-19 crisis, interest in gold has soared, driving its price to a historic. But the worst case now is the widening trade deficit due to supply bottlenecks worsened by the geopolitical tensions arising from the Russia-Ukraine invasion.


Invest in Gold

KEY TAKEAWAYS


Gold prices have been on an upward trend since the war elapsed. As of 4th July 2022, the gold price in Kenya is 6,867.6 shillings per Gram. 10 Grams Gold Rate is 68,675.6 shillings. This could, however, change in favour of the metal or weigh it down due to several factors.


Over the last two decades, gold prices have remained relatively stable as other investments suffer extreme losses. For this reason, there’s been an increase in the number of people who invest in gold. It’s the first thing that comes to mind when they are faced with extreme uncertainty.

With the COVID-19 crisis, interest in gold has soared, driving its price to a historic. But the worst case now is the widening trade deficit due to supply bottlenecks worsened by the geopolitical tensions arising from the Russia-Ukraine invasion.

Gold prices have been on an upward trend since the war elapsed. As of 4th July 2022, the gold price in Kenya is 6,867.6 shillings per Gram. 10 Grams Gold Rate is 68,675.6 shillings. This could, however, change in favour of the metal or weigh it down due to several factors.

As there are multiple stages from bringing gold from mines to the final buyer, various factors contribute to the price calculation of gold.

Here is a list of factors that affect the prices of gold at a given time.

  1. Demand and Supply

Just like the prices of other commodities in the economy, gold prices are also ruled by the law of demand and supply.

When the demand for the metal rises, the prices will also go. For instance, many people invest in gold during the war. During this time, gold fetches a good price.

The vice versa is true when the demand falls. The government reserves determine the supply of gold.

If the Central Bank decides to buy more, the supply would fall in the country, and if the demand remains constant, the price of gold will rise.

  1. Global Factors

Most of the gold in Kenya is imported; thus, the international spot price of the metal is a significant determinant in deciding its value.

If the spot prices rise for whatever reasons, then the metal cost will also automatically rise.

Moreover, other global factors such as war also affect the domestic price of gold in the country. In case of tensions and uncertainties affecting the international market, gold prices will go up.

Global Peaceful conditions will, however, stagnate or depress gold prices.

  1. Inflation

Gold is used as a hedge against inflation by most investors. When inflation rates are high, people tend to focus on gold, thus increasing the price of the metal.

Related ContentSub-Saharan Economy To Grow 3.7% In 2022, A Dip From 2021

Reduced or moderate inflation rates slam gold prices since people will shift to other investment options available.

  1. Value of the Kenyan shilling

The spot price of gold is typically decided in the London Bullion Market. This means that the price is valued in dollars, euros, and pounds.

When the value of the shilling falls, the exchange rate goes up. A higher exchange rate will lead to higher prices for the metal.

  1. Taxes and Import Duty

Customs duty is levied on the shipment when gold is imported into Kenya. A change in government regulations can potentially increase or lower the customs duty, directly affecting gold prices.

Meanwhile, depending on the demographic location, VAT, local taxes, and distribution costs also increase the price of gold. An increase in any of these factors pushes the price upwards.






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