How Current Gold and Silver Prices Are Determined

Precious metals are constantly traded; their markets are so active that it may seem that there is no pause in its trading activities. With the different time zones, it is not surprising for gold and silver to be traded 24x7 in various international bourses and financial exchanges.

It is the market activity that determines the gold and silver prices which may go up or down. The basic supply and demand factors are the main contributors to these metals’ daily prices.

Demand for gold

There are 3 main sources that affect the price of gold and silver.
One, investment demand by an individual, organization or government can affect these precious metals’ pricing. Small or large investments can affect the said metals’ pricing easily depending on the trade demand.

Next, industrial demand of gold and silver affects their pricing easily as they have attractive properties suited for many industrial uses.

Thirdly, there is always the jewelery demand of gold and silver to be adorned or stored and passed on from generation to generation in Oriental cultures. Such high esteem of gold keeps its pricing buoyant.

Supply of gold and silver

However, the supply of gold and silver is not as dynamic as their demand. Supply is limited from the earth’s resources and difficult to source using expensive technology and tools. This causes gold and silver to be more valuable. It is estimated that the total amount of gold that can ever be sourced is only a 20 cubic yard.

And because these precious metals are scarce, their current owners are holding on to them tightly; hence, the value of gold and silver keep increasing making it a vicious cycle on its supply and demand value.

Another important source which can determine the value of gold and silver is the futures market. This arena holds the supply and demand level of these precious metals as this is where buyers and sellers of gold and silver trade actively on various commodities as well as financial derivatives.

Spot price

Futures prices of these precious metals can affect the spot price of a commodity, which is usually gold; a spot price of a commodity is the actual price that the commodity is agreed upon to be traded and delivered immediately.

A spot price of any commodity is the actual value of the commodity at that point in time which is usually traded in US currency. But today the trend is changing with the spot price being traded in other currencies like the European Euros, Chinese Yuan, Japanese yen, Australian dollars, Hong Kong and Canadian dollars.