No single factor sets the price of gold. Interest rates, the US dollar, central bank buying, investor flows and fear all push at once, and their weight changes from year to year. This page explains each driver in plain language and what it means when you buy or sell in Canada.
General information about how markets have behaved. It is not investment advice and not a price forecast. Read the disclaimer.
Gold pays no interest. When bonds and savings accounts pay more than inflation, holding gold costs you that forgone income, which tends to weigh on the price. When rates after inflation fall, or are expected to fall, gold becomes cheaper to hold and has often risen. Markets react to what the Federal Reserve is expected to do, not only to what it has done, so the price can move on a speech or a data release.
Gold is priced in US dollars. A stronger dollar makes gold more expensive for buyers who hold other currencies and has often coincided with a lower gold price. A weaker dollar has often coincided with a higher one. The link is a tendency, not a rule, and the two can rise together when fear is high.
Gold is widely seen as a store of value when prices rise, but the link to inflation is looser than many expect. What usually matters more is whether interest rates are keeping up with inflation. Gold can fall in a high-inflation year if rates rise faster, and rise in a low-inflation year if rates are cut.
Central banks hold gold as a reserve asset. When they buy steadily, they add demand that does not depend on the day's price, and they are often described as buyers on dips. The World Gold Council publishes quarterly figures on official-sector purchases, which analysts watch closely.
Gold-backed funds, bars and coins, and futures positions are where much of the short-term movement comes from. Money flowing into these products adds demand, and money leaving adds supply. When many traders are on the same side of the market, a change of mood can turn a gradual move into a sharp one, up or down.
Wars, sanctions, trade disputes and banking scares can send investors toward gold as a perceived safe haven. These jumps often fade when the stress eases, and a headline that sounds alarming does not always move the price. Be cautious about explanations offered after the fact for any single day.
Jewellery and industrial uses provide a steady base of physical demand. Jewellery buyers tend to pull back when prices spike, which can cushion rallies, and return when prices settle. This is also why dealers see more people selling old jewellery when prices are high.
New mine supply changes slowly because mines take years to develop. Recycled gold responds faster: when prices rise, more people sell scrap, old jewellery and coins, which adds supply. That is one reason sharp price rises can attract many sellers to dealers at once.
Trend-following funds, leveraged traders and headlines can extend a move beyond what the other drivers justify, and reverse it just as fast. After a long rally, the biggest daily drops have often come with little warning. This is why a price that looks stable on a long chart can still swing sharply within a week.
Silver is both a precious metal and an industrial one, used in electronics and solar panels, so factory demand and economic growth affect it as well. It is a smaller market than gold, so its price usually moves by larger percentages in both directions. Some investors watch the gold-to-silver ratio, which compares the two prices.
For a worked example of these drivers acting together over the past year, with sources, read our article What Moves Gold: The Forces Behind the Price and How the Market Reacted. To compare dealers, browse by province.