The article, “Precious Metals and Future Trends” from FundsMatter.com, takes a look at the precious metals outlook and how recent economic conditions may affect behavior of investors. Precious metals have long been seen as a safety net for investors in uncertain economic conditions.
The author begins by describing the four main precious metals sought by investors.
Gold has been used for centuries as currency to trade for good and services. Some cultures actually viewed gold as a sacred element. As paper currency become prevalent, gold served as a standard for the paper money’s value. Gold is very durable and is used in making jewelry and other items where longevity and value are important considerations.
Silver has also been used throughout history for jewelry, eating utensils and currency. Silver has proven useful in conducting electricity and has many industrial applications. Platinum has many of the same uses as silver but is a rarer metal. This factor causes platinum to have the highest value of the four precious metals.
Palladium is not as well-known as the other three precious metals and is similar to silver in appearance. Palladium is used in organic chemistry and is a component of catalytic converters in automobiles.
The industrial uses and difficulty in obtaining precious metals have helped these materials retain a somewhat stable value regardless of current economic conditions. History has shown that during times of economic instability, many investors will buy precious metals. The value of precious metals has been shown to rise during bad economic times. This occurred in 2007 when a financial crises lead to stocks, mutual funds and real estate values sharply decreasing. As the value of these investments fell, the prices for precious metals saw a significant increase.
The most recent example was after the financial crisis that started in 2007. Gold, silver and the other precious metals rose rapidly as all other investments plummeted. In particular, history shows us that precious metals do very well during times of high inflation, runaway debt and falling real estate prices.
Part of this is simply due to the mentality of many investors who know of the traditional importance of these investments during periods of economic instability. While many investors opt to purchase bullion or coins, others may purchase shares of companies that invest in precious metal mining operations.
The article points out how a major indicator in the increased economic importance of precious metals is how the central banking systems of several nations are increasing their investment in these elements. China, Turkey, Russia and Brazil are all increasing their gold reserves.
Financial analysts have been watching the stock market and have noticed how that although the Dow Jones is rising, many investors are selling stocks and the number of available shares has increased by almost 2 million in recent years. Analysts believe this selling will lead to an increase in the purchase of precious metals.
The article discusses economic turmoil in the United States. The two political parties cannot agree on federal spending and this delay in actions could cause the economy to turn downward. The opposition to stimulus and job creation jobs could also delay economic growth.