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What Factors Influence Gold and Silver Prices?

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BBS Team



Did you ever wonder why gold and silver prices seem so hard to predict? The truth is that so many factors have an effect that understanding pricing becomes very difficult. Even experts disagree on where prices will go in the future. Here’s a look at the many issues and realities that impact the pricing of these precious metals.

Supply and Demand

Supply and demand account for the number one influencer of gold vs silver prices. In fact, nearly every other factor is in some way related to either the supply or the demand or both. It stands to reason that if people want more of something, it will bring a higher price, just as it does in any other sphere of business. Supply has a bearing, too, but demand is an even greater predictor of precious metals prices.


The demand for gold and silver tends to rise any time there is any kind of uncertainty in the nation or in the world. Many people want to hold onto precious metals in case they need them for barter in case the country collapses. The uncertainty can relate to political, economic, or sociocultural issues. In any of these cases, gold and silver provide people with something tangible with intrinsic value that they can rely on when all other forms of exchange fail.

What brings about uncertainty? It could be the threat of war, economic downturns, high unemployment, and sociocultural upheaval. Any indication that there may be a national or global crisis may cause people to fear what will happen next. In some cases, gold and silver prices will go up in the face of disasters. Other times, especially when the crisis lasts longer, the situation may lead to volatility rather than a steady rise. For instance, the global pandemic brought both times of despair and times of hope. This constantly changing situation led to increased volatility in gold and silver prices.

Other Forms of Investment

When people want to invest their money, they typically look at several options. They might consider buying stocks and bonds, putting their money directly into a new business venture, buying precious metals, or making some other type of investment. 

When comparing these investments, they are more likely to choose the one that offers the most potential for financial gains. So, if one form of investment is performing poorly, they usually invest somewhere else. For example, when the stock market isn’t doing well, many people look to precious metals as an alternative. Therefore, when the stock market is floundering, gold and silver prices usually rise.

Industrial Uses

The industrial uses of precious metals influence the supply and demand and thus the price. Silver is especially useful in many industries, which increases the demand for it. However, in recent years, there has been a decline in demand for industrial silver. When manufacturing slowed, there was less need for the metal. Later, though, as the world economy began to reopen, the price of silver went up 70% in less than a year due largely to increased demand. 

Precious metals are used extensively in many industries. Technology manufacturers often use gold and silver. For example, look inside your iPhone, TV, laptop, or even electronic appliances, and you could find gold. Silver is used in solder and brazing alloys, LED chips, batteries, photography, and even nuclear reactors. Everything from touch screens to wood preservatives may contain silver. In addition, dentists often use gold vs silver for crowns and other dental appliances.

Economic Climate

The state of the economy has a powerful impact on all forms of investment, including gold vs silver prices. Precious metals are increasingly popular as a form of investment when the economy is doing poorly. Many investors turn to gold and silver as a hedge against inflation, especially when they see signs of inflation on the horizon. 

When it seems that paper currency is unstable or likely to lose value, gold and silver offer a safe haven investment. As a physical, tangible asset, these precious metals will never completely lose their value, even in a down economy. On the other hand, a strong economy may increase the need for industrial precious metals, which can sometimes raise the price of gold and silver.

What about Interest Rates?

Precious metals experts watch the Federal Reserve Board carefully to see what they will do about interest rates. The general consensus is that gold and silver prices have an inverse relationship with interest rates. In other words, when interest rates are high, gold prices go loser.

Yet, this is not always true. If you look at the historical price data side by side with the interest rates, you will see that there’s not much of a direct relationship between the two. The problem with this simplistic assessment is that there are just too many other factors to consider.

What Factors Make Precious Metals a Good Investment?

In the end, no one factor determines when gold and silver are the best investment. No one issue can tell you whether it’s a good time to buy, sell, or hold onto your precious metals. The answer always comes in looking at the overall picture, considering all the factors that could influence the prices.

So, it makes sense to talk to a precious metals expert before you make a move. Unless you have years of experience with the gold and silver market, it’s very hard to make a wise choice. Could you get lucky? Maybe. However, savvy investors prefer to have more to go on than a wild guess. 

No investment is ever a sure thing – not even physical gold or silver. Will you choose the optimal time to buy or sell? You could take a shot in the dark and hope for the best, and you might come out okay. Or, you might lose more than you gain. Talking to a precious metals professional advisor is the surest path to understanding all the factors involved in gold and silver pricing. Then, you can take advantage of the fluctuations to build your portfolio and your wealth.

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