Precious metals are called such because it is much more difficult to find them than, say, tin, zinc, or aluminum, which are no less useful. Throughout the history of mankind, the shortage of precious metals has made them more popular. A significant role was played by the fact that for a long time they served as money. And then it was discovered that due to their plasticity, they can be used in jewelry, dentistry, electronics, and other fields. And yet they have not lost their main function, investment.
Investing in precious metals helps traders hedge global uncertainty and volatility, as well as diversify their portfolios. Interest from investors does not dry up, regardless of whether they act independently or prefer the services of brokers. However, the latter option is becoming more common, too many factors have to be taken into account when planning your actions. Here are the 3 main ones that affect the value of precious metals.
The cost of precious metals is determined by demand
First of all, as with many other commodities, the price of precious metals is determined by supply and demand. They, in turn, can be extremely unstable. At the same time, the supply for precious metals is limited, while the demand is more or less constant.
So, for example, a strike at a silver mine can trigger a drop in supply, which will cause the price to rise. Or, on the contrary, the opening of a new mine-its decline. The increase in demand may be caused by the opening of a new opportunity to use precious metal or purchase from a country.
Gold and silver are still considered reliable investment instruments. Despite all the changes in the markets, their price is not as volatile as, say, currencies or securities. It is not surprising that when periods of economic instability occur, everyone remembers this and begins to invest in threatening to devalue capital in metals.
On the other hand, a healthy economy does not need such “shelters”, and the demand for precious metals is falling. And investors pay attention to riskier, but also more profitable instruments.
Inflation, monetary policy, and currencies
Inflation is a phenomenon that reduces your efforts to accumulate capital to zero. It doesn’t matter what currency you saved this money in. Periodically, inflation occurs in all countries, so no one is immune to it. And when money is massively devalued, precious metals become the most popular in any form, even if they are products made from them.
At the same time, the actions of the country’s main financial structures often lead to inflation itself. And sometimes, if you have the appropriate education, the results of these actions can even be calculated. Moreover, in trade wars, the devaluation of its currency still continues to be a good weapon.
In general, if you select the 3 most reliable investment instruments, it still remains bank deposits, real estate, and all the same precious metals.