What Drives the Price of Gold? Why It Rises and Drops

Gold hits a record one month and drops by thousands of dollars a few weeks later. If you hold gold, or plan to buy some, you have probably wondered what drives the price of gold in the first place. Is it the Fed? China? Panic in the stock market? The honest answer is all of these, and a few more.

In this guide, we explain the main forces behind the gold price, why it rises and why it drops, and what the movements look like in Singapore dollars. We use a year of daily spot prices from our precious metals price comparison and real dealer prices to show what the spot price leaves out.

What Drives the Price of Gold? The Short Answer

The gold price is set in global markets, mainly in US dollars per troy ounce, where large banks, funds, central banks and dealers trade every day. Like any commodity, it moves when buyers want more gold than sellers want to sell, or the other way round. The question is what changes their minds.

These are the main drivers:

• The US dollar: gold is priced in dollars, so the value of the dollar feeds straight into the price.
• Interest rates: gold pays no interest, so higher rates on cash and bonds make it less attractive.
• Central bank buying: official buyers add hundreds of tonnes a year to their reserves.
• Investment demand: gold ETFs, bars and coins bought by private investors.
• Fear and uncertainty: wars, trade conflicts and market crashes push money into safe havens.
• Inflation expectations: many investors buy gold to protect purchasing power.
• Jewellery, industry and mine supply: slower forces that matter more over years than over weeks.

For a Singapore buyer, add one more: the exchange rate between the Singapore dollar and the US dollar. We come back to it below.

Gold Price in Singapore Over the Past Year: Our Data

Before we look at each driver, here is what the price actually did. The chart shows the daily gold spot price in Singapore dollars per troy ounce from 25 September 2025 to 23 October 2026.

Three things stand out. Gold climbed steadily from October 2025 to a peak in late January 2026. It then swung hard through February and March and trended lower into the summer. Over the 12 months to 23 October 2026, it ended 4.0% down.

For the live price, per gram and per kilo, see our gold price chart and the gold price per gram in Singapore.

Driver 1: The US Dollar and the Singapore Dollar

The global benchmark price of gold is quoted in US dollars. When the dollar weakens, gold becomes cheaper for buyers who hold other currencies, so demand tends to rise and the dollar price goes up. When the dollar strengthens, the reverse often happens. The link is not fixed, but traders watch it closely.

Why the Singapore dollar changes your price

You pay in Singapore dollars, so the price you see is roughly the US dollar price multiplied by the exchange rate. That means two things move your price at once: gold itself and the SGD/USD rate.

Singapore is unusual here. The Monetary Authority of Singapore (MAS) runs monetary policy through the exchange rate rather than an interest rate, managing the Singapore dollar against a basket of trading partners’ currencies. When the Singapore dollar strengthens against the US dollar, gold gets a little cheaper for you in local terms.

What our data shows

Here is the same ounce of gold priced in both currencies on three dates:

Over the 12 months to 23 October 2026, gold fell 2.3% in US dollars but 4.0% in Singapore dollars. The difference came from a stronger Singapore dollar. Had the exchange rate stayed at 1.2991, an ounce would have cost about S$5,223.68 on 23 October 2026, not S$5,134.83. That is close to S$89 per ounce, from the currency alone.

What does this mean for you? When you compare gold prices over time, check the currency. A headline about gold in US dollars may not match what happened to your price in Singapore.

Driver 2: Interest Rates and the Fed

Gold pays no interest and no dividend. Holding it has an opportunity cost: the income you could have earned on a fixed deposit, a Singapore Savings Bond or a US Treasury bill instead. When interest rates rise, that cost goes up and gold often looks less attractive. When rates fall, the cost shrinks.

Many analysts focus on real interest rates, which are rates minus inflation. If a bond pays less than inflation, the real return is negative, and gold’s lack of income matters less.

Why does the US Federal Reserve get so much attention? Because the gold price is set in dollars, and US rates shape the value of the dollar and the yield on the world’s largest bond market. Decisions and statements from the Federal Reserve can move gold within minutes. Expectations matter as much as the decision itself: if markets expect a cut, much of the move may already be in the price before it happens.

Driver 3: Central Bank Buying

Central banks hold gold as part of their foreign exchange reserves. Over the past few years they have been large and steady buyers. According to the World Gold Council’s Gold Demand Trends for 2025:

• central banks bought 863 tonnes of gold in 2025,
• that was below the 1,092 tonnes they bought in 2024,
• 2025 broke a run of three years above 1,000 tonnes.

The World Gold Council also noted that high gold prices seemed to make some central banks more cautious. That is a useful reminder: even the steadiest buyer reacts to price. Still, demand of this size is a steady source of support for the market.

Read also: What Is the Cheapest Way to Buy Gold in Singapore?

Driver 4: Investment Demand From ETFs, Bars and Coins

Private investors move the price too, and they can do it fast. There are two main channels:

• Gold ETFs: exchange-traded funds that hold gold in vaults. When money flows into them, they must buy metal.
• Bars and coins: physical gold bought from dealers and mints, often by people who plan to hold it for years.

Both were strong in 2025. The World Gold Council reported net inflows of 801 tonnes into gold ETFs, the second strongest year on record. Bar and coin demand reached 1,374 tonnes, up 16% and a 12-year high. Total demand including over-the-counter trading passed 5,000 tonnes for the first time.

Investment demand also works in reverse. When ETF holders sell, the fund sells metal, and the price can fall quickly.

Driver 5: Fear, Geopolitics and Uncertainty

Gold has a long record as a safe-haven asset. It has no counterparty: it does not depend on a company, bank or government to keep a promise. When investors worry about wars, trade conflicts, banking stress or a stock market crash, some of them move money into gold.

The World Gold Council expects persistent economic and geopolitical uncertainty to keep supporting demand for gold as a reserve asset. Fear-driven buying can push the price up fast. It can also fade fast once tensions ease.

Driver 6: Inflation Expectations

Many people buy gold to protect their savings from rising prices. When investors expect inflation to rise, demand for gold often picks up. The link is real over long periods but loose over months and years, so gold does not move one-for-one with consumer prices.

In Singapore, inflation data comes from the Department of Statistics, and MAS publishes its own inflation forecasts with each monetary policy statement.

Driver 7: Jewellery, Industry and Mine Supply

These forces move slowly but matter over the long run:

• jewellery demand, which tends to fall when prices are high and rise when they drop,
• industrial use in electronics, dentistry and other technology,
• mine supply, which cannot jump quickly, because a new mine takes years to build,
• recycling, which rises when high prices tempt people to sell old jewellery.

Because supply reacts slowly, short-term price moves come mostly from the demand side: investors, central banks and currency markets.

Why Does the Gold Price Drop?

“Why gold price drop” is one of the most common gold searches in Singapore. The drivers above work in both directions, so a drop usually comes from one or more of these:

1. Profit-taking after a rally: after a big run-up, investors sell to lock in gains.
2. A stronger US dollar: gold becomes more expensive for non-US buyers.
3. Higher interest rates, or fewer expected cuts: holding gold costs more in lost income.
4. Easing tensions: less fear means less demand for safe havens.
5. ETF outflows: funds sell metal to repay investors.

Our data shows how sharp a drop can be. On 30 January 2026, the day after the record, gold fell 6.7% in Singapore dollars, from S$6,901.39 to S$6,437.42 per ounce. By 23 October 2026, it was 25.6% below the peak. The fall in US dollars over the same period was 26.3%.

Does a drop mean gold has stopped working? No, it means the drivers turned. Nobody can say for certain when the next rise or fall will come. They are a reason to buy in amounts you can hold through the swings, not with money you may need soon.

Why Is the Gold Price Rising?

When gold rises, look for the mirror image: a weaker dollar, falling or expected falling interest rates, strong central bank buying, ETF inflows and rising fear. In 2025 several of these came together. The World Gold Council reported an average LBMA price of US$3,431 per ounce for the year, up 44%, with 53 new all-time highs.

Is the gold price going up or down next? Nobody knows for sure. Forecasts differ widely, and we do not make them. What you can control is what you pay when you buy.

What the Spot Price Does Not Show: Premiums in Singapore

Everything above explains the spot price: the price of gold for immediate delivery in the wholesale market. When you buy a coin or bar, you pay spot plus a premium that covers minting, distribution and the dealer’s margin.

Premium % = (dealer price − spot price) ÷ spot price × 100

Here is how it looks for 1 oz gold coins at one Singapore dealer, Silver Bullion, on 23 October 2026, with spot at S$5,134.83 per ounce:

The same ounce of gold, the same day, and a gap of S$332 between the cheapest and the most expensive coin. That gap does not depend on the Fed or on central banks. It depends on which product and which dealer you choose.

Investment-grade gold is exempt from GST in Singapore if it meets the IRAS rules. We explain the conditions in our glossary entry on investment precious metals and GST.

How to Use This When You Buy Gold

You cannot control the gold price. You can control how you react to it. A simple approach:

Step 1: Check the price in Singapore dollars

Look at the SGD price, not only the US dollar headline. Our gold price chart shows both the trend and today’s level.

Step 2: Decide on an amount you can hold

Our data shows a 25.6% fall from peak in under nine months. Buy only what you could hold through a move like that without being forced to sell.

Step 3: Consider buying in stages

Spreading purchases over several months means you do not need to guess the right day. Some buys will land high, some low.

Step 4: Compare premiums, not just spot

Compare the same product across dealers in our gold coin price comparison and gold bar price comparison. Larger bars, such as 100 g gold bars and 1 kg gold bars, usually carry lower premiums per gram than small coins.

Step 5: Check who you buy from

See the list of gold dealers in Singapore we track, and ask for the buyback price before you buy.

Summary: What Drives the Price of Gold

Compare Gold Prices Before You Buy

The gold price moves for reasons no single buyer controls. The premium you pay is different: you choose it every time you pick a product and a dealer. That is where comparing prices saves real money.

We track gold coin and bar prices from Singapore dealers every day. Start with our investment gold price comparison and see what the same ounce costs from each dealer before you buy.

This article is for information only and is not financial or tax advice.