There are several factors that are used to determine or influence the prices of gold and silver in the global economy today. Gold has been there for a while now and it is a popular investment which has yielded good returns. Gold and silver prices have a tendency of fluctuating now and then depending on the state of the economy but this fluctuation differs from one state or country to the other. Due to this, investors in physical gold and gold futures usually need to have a close watch so that they can know when the prices are high and when they are low. There are a number of factors that are used to determine the gold and silver prices. Some of these factors include:
The economy of a country or state is determines the price of gold or silver. This is a very crucial factor that you need to consider when determining the price of gold or silver. The state of the global economy should be looked into and when the economy is stable then the prices of the gold and silver can be high. When the economic situation is poor or weak it means that most investments at that given time are giving low returns and the same applies to gold. During such economic times most people like investing in gold because gold is known to perform well when there is an economic crisis.
- Central bank and the mining companies
The central banks of various countries or states and the mining companies are the ones that are responsible for holding the large reserves of gold. They get these large reserves by buying and selling gold and silver. Due to this, they are the ones that determine the overall economic scenario and the movement of the currency. They have plenty of gold for sale and they are the ones that determine the prices at which they are going to sell their gold or silver. When there are frequent transactions in any of these bodies it means that there are drastic changes in the prices of these precious metals.
- The strength of the dollar
The strength of the dollar is a very crucial factor that is used to determine the prices of these precious metals. The US dollar is a currency that is recognised globally and therefore when the dollar weakens most of the investors start selling their currency and buy gold and they do this for security reasons. What this does is that it makes the demand for the gold to increase or jump and this also leads to the rise in the prices of gold and silver.
- Demand and supply
Gold and silver are very precious metals and their prices are essentially determined by demand and supply. When the demand of silver is high the price of silver per ounce also keeps increasing and vice versa. The demand for gold is high in most cases because apart from being a investment instrument it is also used for industrial reasons.