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Pricing - What factors influence the price of gold and silver?


What factors influence the price of gold and silver?
  • Bank failures
  • When dollars were fully convertible into gold and silver, both were regarded as money. However, most people preferred to carry around paper bank notes rather than the somewhat heavier and less divisible metal coins. If people feared their bank would fail, a bank run might have been the result therefore redeeming their gold for dollars.
  • Low or negative real interest rates
  • If the return on bonds, equities and real estate is not adequately compensating for risk and inflation then the demand for precious metals and other alternative investments such as commodities increases.
  • War, invasion, looting, crisis
  • In times of national crisis, people fear that their assets may be seized and that the currency may become worthless. They see gold and silver as solid assets which will always buy food or transportation. Thus in times of great uncertainty, particularly when war is feared, the demand for bullion rises. 

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