1. Mining production: The Earth contains a finite supply of precious metals such as gold, silver, and platinum. Prices of these limited precious metals depend largely on the efficiency with which the mining companies extract them from the ground. Production and labor costs as well as labor disputes also factor into the price.
2. Industrial and jewelry demand: Precious metals products in high demand will command a higher price.
3. Saving and disposal: Many people purchase products made from precious metals. Those metals may remain in their possession for many years; however, if a great deal of people return the metals from these products back into the market—usually by disposing the products and melting them down—it may affect supply and therefore price.
4. Central banks and gold reserves: Many central banks hold gold in reserves, and they may sell the gold as needed. This practice affects market prices.
5. Inflation and national debts: When economies based on the gold standard experience devalued currency resultant of debt, demand rises, leading to gold’s increased value.
6. Hedging: Precious metals rise in value when other investments such as real estate or securities do not provide adequate risk mitigation for investors