Which factors most significantly affect gold and silver prices?

Hundreds of economic pundits have appeared thousands of times on Fox News, CNN, MSNBC and other major news networks in the last decade to talk about factors that affect gold and silver prices. Every analyst, broker and trader in the market has his or her own theory on what will happen to gold prices and why. Countless components cause gold and silver price fluctuation. Most, if not all, of these components can be categorized in one of three ways:

 Value of US Currency

This is the most simple factor that affects gold and silver prices. Precious metals are priced based in USD, so simple mathematics dictates that if the US Dollar Index decreases then gold will cost more. Dollar declines mean it takes more dollars to buy an un-changing volume of gold. This is one of the key reasons investors purchase gold if they see future devaluation of our currency.


Gold is often hailed as a security asset or an insurance plan but some people invest in precious metals purely for profit. These investors move massive amounts of funds and analyze the gold spot price every moment of every trading day. Once their-multi-million dollar investment of a month ago is (hopefully) up one to five percent they liquidate and move the market. Another form of profit-taking is done by household investors. There have been multiple occasions during the last few years when gold and silver have jumped by 10 percent or more in a single trading day. This can cause safety-seeking investors to get greedy and move back into cash before the gold cycle runs its course. Investors also make this same mistake when gold drops rapidly after a substantial period of rapid gains.

Global Speculation

We must not forget that the physical gold market is a global one. Gold and silver spot prices do not revolve solely around the oversupply of US currency, institutions who want to take profits or household investors who get the false impression that the gold cycle is finished. Europe is in a continent of trouble, the Middle East is in uproar as always and countries such as India and China are hoarding as much gold as can be found. Gold is a worldwide business with hundreds of millions of employees.

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