Why Prices of Gold and Silver Deviate Through the Years

Note: Post may contain affiliate links.

Throughout the centuries, gold and silver have been valued by people due to their important characteristics. One reason people like to accumulate gold and silver is they know that they can sell their stash once the price of either starts to rise. By themselves, gold and silver don’t change in value since they’re inert metals.

By buying bars and coins, you can include gold or silver in your investment plans or a precious metals IRA, as you see fit.

It’s important to note that the law of supply and demand still applies to the price of gold and silver. This means that the price of gold or silver can be pressured to go down or up by how investors buy or sell these precious metals.

Here are the reasons why gold and silver prices have deviated over time:

Emotional Appeal of Gold and Silver

The growth of both gold and silver’s price depends a lot on the emotions of investors. If investors decided that either metal is sure to go up in value, true to form, many investors will try to get in on the action. It can be safely said that the price of gold and silver is subjective. Hence, even someone like you can affect the rise and fall of both metals’ prices.

As long as there’s a sufficient supply of gold and silver, prices will stay as they are, too. Some investors might manipulate the market for gold and silver by buying then hoarding. When this happens, to stabilize the market, it may be up to the central bank of the country to step in and buy or sell gold as seen fit.

Demand for Industrial Uses of Gold and Silver May Fluctuate

Gold and silver can be used by industries to manufacture other applications. For instance, gold is mainly used to make jewelry, gold coins, and bars. Silver has uses in industry, jewelry, silver coins and bars, and making electronics. 

If the demand for gold and silver goes up amongst these applications, then the supply may be affected, hence the price of both may also go up.

Investors May Start Favoring Silver Over Gold

When investors think of precious metals to invest in, the first thought of many is to buy gold. However, the demand for silver is relatively stable since there are so many industries that need it. 

If the supply of silver gets affected, then you may expect that the price of silver will go up too. But it remains to be seen whether the rise in the price of silver will still be relatively stable if speculators start to buy silver and ignore gold.

Mining Companies May Face Inadequate Production of Gold and Silver

By 2240, the supply of silver may peak, which is also when the mining industry’s existing silver mines may be exhausted. You can expect the price of silver to go up then since miners will have to find new deposits of silver to dig out of the ground.

Since many miners are having trouble finding a fresh supply of gold to be mined, gold is also peaking. Existing supply will then be limited and investors may be intent on buying the current stocks of gold at higher prices.

It’s expensive for mining companies to look for a fresh production site of either gold or silver. For one thing, a mining company may need 5 to 10 years just to operate one mining site before it can be considered profitable. So, supply is tight; investors will then have to make do with the existing stocks of gold and silver when they trade.

Central Banks Are Currently Favoring Gold Over Silver

Following tradition, many central banks prefer to buy gold rather than silver at the moment. This is why the price of silver seems to be lower in the market, compared to gold’s market price. However, even central banks have an ear on the ground to check market sentiment for either metal. 

Should industrial and aesthetic applications start showing higher demand through higher prices for either metal, central banks may check the pulse of the market to see if they should buy or sell.

Final Takeaway

The prices of gold and silver are always fluctuating, based on the emotional moods of the market investors. There are some times when speculators seem to be dominating the market. If the prices start to fluctuate wildly, central banks may step in to buy or sell these metals to control the market. 

The rule of supply and demand still applies to both gold and silver, so it pays to monitor news reports about it, especially when the news source is the central bank.

Sharing is caring!

Leave a Reply

Your email address will not be published.

Scroll to Top