What Affects the Price of Gold and Silver?

What affects gold and silver prices? In order to get the answer for this question you need to know certain things. Firstly, silver and gold have always been considered the best investments during recession. There has been a steady rise of the price of gold and silver since 1995. Seeing this steady rise, many investors and traders invested in these precious commodities. There were many who invested in these metals and earned huge sums of money.

All have witnessed that while the financial market of the world was falling, the prices of gold and silver have been achieving a new peak. However, the big question still is what affects gold and silver prices? The price of the metal commodities depend on the supply and demand. Therefore it is a wise decision to invest in these commodities. However, there are risk factors as well. The price of gold and silver swing daily, because of heavy volume. It depends upon geo-political unrest, bulging country deficits, and war.

When there is an increase of money supply in the market then people turn to hard assets such as silver and gold. This is because the increase in supply of money diminishes the money value. Alternatively, silver and gold never lose their worth during all times. So, for securing their money, people invest in silver and gold. The US dollar is also affected by the prices of silver and gold. This is because the precious metal prices are determined as per the US dollar value within the international market. Hence, whenever the US currency value decreases, the prices of metals increase. As the value of US dollars goes down, it becomes cheaper for investors to buy the precious metals and so there is higher demand which leads to higher prices. This is what affects gold and silver prices.

The prices are generally high during some calamities, so investors should stop and think why it affects the prices of gold or silver. How is this event related to selling and buying of metal? This is because the event causes a financial ripple along all the global areas and unless the global financial markets do not take this opportunity, no investor will sell or buy the precious metals. Whenever there is an opposite movement of exchange rate of US dollar and Euro, an immediate change can be seen in the gold price.

Most of the people are of the opinion that oil prices also affect the prices of gold and silver. Definitely they do, but not in a direct form but indirectly. This was seen when the prices of oil rose to $145 during 2007. However, it did not have much effect on the prices of precious metals. If the oil prices stay and do not a ‘spike’ then they will have worldwide impact on inflation and this will cause silver and gold prices to rise. Also, if there is a switch of oil pricing from dollar to any other currency, there will be crisis and this is what affects gold and silver prices.

Source by Jon Safer

What Affects the Price of Gold and Silver?