Silver and gold are precious metals that are a scarce commodity and an investment. They are subject to frequent price fluctuation, and it is crucial to understand the pricing trends when investing in these precious metals. The influences on the price of gold and silver can be caused by long-term or short-term factors.
Like most other commodities, supply and demand also play an essential role in determining gold and silver prices. The supply of these precious metals is limited. With the increase in demand, the price of gold increases and vice versa. There are many other factors too that help determine gold and silver prices in the global markets. To know the latest gold and silver prices, click here.
- Economic Growth
One of the essential factors determining gold and silver prices in the global markets is the economic growth of key economies. When economic growth is profitable, people usually resort to buying equities rather than spending on gold and silver. It leads to a rapid fall in the prices of these valuable commodities.
On the flip side, when the economy is affected by low job growth and unemployment, you will witness an increase in gold prices.
- Strength of the Dollar
The prices of gold and silver metals in the global markets largely depend on the U.S. dollar, the leading global currency. Over time, it has been seen that there is a negative correlation between the performance of the dollar and prices of gold and silver.
A weak dollar creates pressure on the price of gold and silver. It happens because a falling dollar increases the value of other currencies and commodities around the world. On the other hand, if an economy is growing, the strengthening U.S. dollar pushes down gold and silver prices.
- Global Inflation
The rising money supply has always affected the prices of gold and silver. Gold and silver are used to hedge inflation. In times of high inflation rates, the prices of these metals tend to have a sharp increase due to the increase in demand. Gold is not affected by any fluctuations in the currency value, which is why it is considered a hedge in times of inflation. During recessions, people are more inclined to invest in gold because of its lasting value.
- Monetary Policy
The Central Bank’s monetary policy has the biggest influence on gold and silver prices. Over the years, all the central banks across the world have expanded their gold holdings. Any change in the strategy among central banks can affect the sales, which can influence the prices of these precious metals.
- Interest Rate Level
The value of gold and silver increases only through its price. This makes these metals sensitive to interest rate movements which are generally affected by changes in different countries’ key interest rates. Gold and Silver prices have an inverse relationship with the level of interest rates.
When interest rates rise, other investment opportunities become more attractive, leading to a fall in gold and silver prices. On the other hand, with a fall in real interest rates, gold and silver prices rise.
Geopolitical uncertainties can also have a lasting impact on gold and silver prices. Investing in these precious metals is an excellent way of diversifying a portfolio. Click here to stay updated on the daily change in gold and silver prices.