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How does the rate of exchange between precious metals fluctuate?

Gold, silver, platinum and palladium are bought and sold throughout the world each day by professional traders, corporations and individuals. The prices of these metals relative to currencies such as the US dollar or British pound move up and down independently of each other.

For example, one day the price of a gold ounce may increase by $10 while the price of a silver ounce may decrease by 50 cents. Therefore the relative price of gold in silver terms has increased, because it takes more silver to buy an ounce of gold. However, if on the next day the gold price decreases by $5 and the silver price increases by 10 cents, the relative price of gold has then decreased in silver terms.

The important point to understand is that the currency prices of metals change independently, so the metals' relative values to each other change accordingly. At one point in time, it may take 70 ounces of silver to buy an ounce of gold, but then a year later it may only take 50 ounces of silver to buy an ounce of gold. During that time the silver price in dollar terms has increased more rapidly than the gold price in dollar terms.