It is generally known that gold is widely used as an investment object that stores valuable value. However, investing in gold dominates the risk due to several factors and one of the most influencing factors is the fluctuation in the price of gold. There are three causes of gold price fluctuation: the price mechanism, the central bank and the emergency. The primary cause of gold price fluctuation is the price mechanism. Defined in economic terms, the price mechanism indicates the relationship between the price, demand and supply of both goods and services. In reality, both buyers and sellers engaging in trade are both influenced by the price mechanism, and the price mechanism, in turn, is influenced by the supply and demand of buyers and sellers (Shaw, 2014). Likewise, the price of gold is inevitably based on this pattern, and the price mechanism plays an important role in the fluctuation of the price of gold (Harberger, 1957). Supply and demand are in fact the two most necessary terms when focusing on the price mechanism. In terms of meaning, demand is the buyer's desire and ability to spend money to purchase a specific quantity of goods and services at an appropriate price (Elberse & Eliashberg, 2003). Demand actually influences the price of gold to change in the same way (Smith & Kiesling, 2003). If there is more demand, the price of gold will rise; moreover, people will definitely get excited and start investing in gold as long as the price of gold increases according to demand. On the contrary, if there is less demand, the price of gold will decrease and people will ignore it and not pay attention to gold (Demand, 2009). Not only does demand influence the price fluctuation of gold, but supply also causes the price of gold to fluctuate. S...... half of the document ......cases_-eighth-edition-solutions-manual-and-test-bank-william-h-ShawdocxSheard, P. (1989). The leading banking system and corporate monitoring and control in Japan. Journal of Economic Behavior & Organization, 11, 3, 399-422. doi:10.1016/0167-2681(89)90037-1Smith, V. L., & Kiesling, L. (2003). Demand, not supply. Wall Street Journal, 20, 13. Retrieved from http://www.wsj.com Stiglitz, J. (2009). The global crisis, social protection and work. International Labor Journal, 148, 12,1-13. doi:10.1111/j.1564-913X.2009.00046.xSupply. (2014). Supply (economics). Wikipedia. Retrieved from http://en.wikipedia.org/wiki/Supply_(economics) Worthington, A. C., & Pahlavani, M. (2007). Gold investments as an inflation hedge: Evidence of cointegration with allowances for endogenous structural breaks. Applied Financial Economics Letters, 3, 4, 259-262. doi:10.1080/17446540601118301