Mainly the price of all the commodities is driven by supply and demand of the particular commodity and we are going to see about the driving forces of each commodities in detail below,
Gold and Silver
1.Monetary policy and Economical data:
Gold price is influenced greatly by the monetary policies of various central banks in major economies like US, Europe ,Japan, china. In short, we can interpret the influence of interest rate on the gold price as below,
Interest rate (Increases) => Gold price will decrease
Interest rate (Decreases) => Gold price decrease
Because the general public has two ways to save their money and the first way is in money related instrument (FD, Bonds etc) and the other way is to buy precious physical commodities mainly gold and silver. Now if the money related instruments are providing low return because of the lowered interest rate, then the demand for gold will increase and if the interest rate is increased then the demand for gold will get reduced.
And the economic datas which gives insight on the interest rate decisions in future will also influence the price of gold.
2.During global wars and geo political crisis:
During the time of wars and geo political concerns, the price of gold will increase as the hope on the money market instruments get reduced and gold is considered to the safe heaven and alternative to money. And in short we can describe the above situation as,
Global wars and Geo political crisis => Increase in gold price.
Inflation indicates the economic growth and expansion and when the economy is growing, the central bank expands the money supply and there by the value of money started decreasing so the investors tend to move towards buying gold and vice versa is also possible.
Inflation => Increase in gold price
Deflation => Decrease in gold price
4.For Jewelry and industrial usages:
Jewelry and industrial usages also increases the demand for gold and thereby increase the price of the gold.
The gold is mostly quoted and traded in US dollar so the movement of the US dollar will causes price changes in gold.
US Dollar(Appreciation) => Decrease in the gold price
US Dollar(Depreciation) => Increase in the gold price
1.Production of gold:
The production level of the gold from mines, cost involved also determines the price of the gold in supply side.
Increase in production or decrease in cost => Decrease gold price
Decrease in production or increase in cost => Increase gold price.
2.Recycling of gold:
The amount of recycling of gold will also determines the level of supply as both new and old gold is of same rate and the value of gold wont change with years of usage.
3.Activites of central banks:
The central banks around the world tends to hold a big amount of gold in their reserves so if they are selling in big quantity then it will influence the price of gold to certain extent but it will distort the price much as the allowed quantity for selling is limited.