How are gold prices set — and why do they fluctuate?
The price of gold recently reached an all-time high. So… how is the price of this precious metal decided and what affects its swings?
Gold jewellery is back on the spotlight as prices for the precious metal have hit all-time highs in recent months.
On September 16, 2025, spot gold reached approximately US$3,689 per troy ounce, the highest ever recorded, and, although the number dipped slightly (at the time of writing this), many analysts are keeping a close watch on how recent US policy announcements (the Federal Reserve decision to lower interest-rates) and inflation data which might further drive up that price.
As expected with such steady increases, sales and purchases of gold are also on the up — some people wanting to cash in, others holding on, expecting the price to keep climbing. In this article we explore some of the many factors that influence the price of gold and its fluctuations. It is not a clear-cut system or process but one that is full of fascinating, often interconnected interests as well as seemingly unrelated events happening all across the globe: from supply and demand, economic markers, the United States dollar, and wider geopolitical events.
Of course, gold jewellery prices are slightly different, as one must take into account things like design elements (maker, brand, rarity), craftsmanship, and condition; not just weight and purity of material.
“We constantly seek out varied and interesting pieces in our consignment messaging,” says Christine Power, Head of Fine Jewels, Watches & Luxury Accessories at Webb’s. “Recently, a noticeable amount of clients are enquiring about what their gold items may attain by selling at auction. It can be pieces they’ve inherited or simply no longer have a need for. The realisation this could return a healthy profit is a very attractive outcome. Gold continues to be seen not just as a timeless asset, but as a smart investment—making it highly sought-after in today’s market."
Gold jewellery prices are set taking into account rarity, craftsmanship and other design considerations rather than just its gold content and purity.
The starting point
The global gold price is not dictated by an all-knowing, all-powerful central entity. However, the number of transactions taking place through big financial hubs such as London and New York — especially the LBMA in London and COMEX in New York— along with over-the-counter trades — give an indication of the metals desirability and price at a particular time.
Large banks, traders, and institutional investors trade gold in these markets and their type of transaction (purchases vs sales) set what are called “spot prices” (a kind of ‘photograph’ of what the price is like at any given moment of the day in any of the well respected trading platform), usually quoted in US dollars per troy ounce (approx. 31 grams). That figure is then converted into local currencies, like New Zealand dollars, and adjusted for costs such as transport, refining, retail mark-ups, and sometimes taxes or import duties.
So… what affects the spot price of gold?
Supply and demand
Gold, like pretty much most things in a free market, follows the simplest rule of economics 101: supply and demand. That fundamental relationship where the quantity of a good or service available (supply) and the desire to buy it (demand) interact to determine its price.
Gold supply comes from mining (China, Russia and Australia are some of the world’s biggest suppliers) and recycled gold (jewellery and other sources that are melted down). Demand comes from jewellery buyers, industrial uses such as printed circuits and in transistors, central banks, investors and investment vehicles like ETFs. When demand outpaces supply, prices tend to rise. What makes demand increase you ask? Many factors such as:
Demand and supply is one of the biggest defining factors for gold’s fluctuating prices.
Inflation, interest rates and currency
Gold prices tend to fluctuate alongside inflation and interest rates. This is in part because people and institutions look for safe places to put their money when currencies are shaky. For instance, when inflation is high, ‘cash’ loses some of its purchasing power leading many investors to exchange that currency for tangible, solid gold to protect their wealth against the whims of the country’s legal tender.
Currency exchange fluctuations (the price of one currency against another) also plays a big role in the price of gold, especially the price of the US dollar since that is the dominant currency for global gold pricing. As a rule of thumb, a strong US dollar makes gold more expensive in other currencies, which can lower demand for the material outside the United States. Meanwhile, a weaker US dollar tends to have the opposite effect.
The US dollar is the dominant currency for global gold pricing.
Geopolitical events
Gold prices can often be used as a sort of barometer for global stability. In recent decades things like pandemics, financial crises, wars, increased sanctions, and systemic risk have sparked an increased demand for safe-haven assets such as gold.
Geopolitical shocks and the market volatility that ripples from them across the globe tend to trigger increased demand for gold. Analysts, for instance, have been making the connection between the current high price of the precious metal and the uncertainty caused by global tariffs from the United States and ongoing conflicts in the Middle East and Eastern Europe.
So… as you may have gathered by now, how the price of gold is decided does not have a straightforward answer.
Like that of any other scarce material, it is decided on by a huge number of factors pulling and pushing at the purse strings of investors, institutions and even individuals who decide to auction or purchase gold when they feel there is a financial gain to be made.
Our specialists from the Fine Jewels, Watches & Luxury Accessories department welcome consignments of gold, in any presentation, for our regular auction series happening throughout the year. From heirloom pieces to coins, accessories and other items, contact us for a complimentary, no-obligation appraisal.
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21.10.25—03.11.25
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Thursday 9 October
Contact
Christine Power AJP (GIA)
Head of Fine Jewels, Watches
& Luxury Accessories
christine@webbs.co.nz
M +64 27 929 5607