Putting your money in precious metals like gold, silver, platinum, and palladium is a great idea to have a diverse portfolio. Just like any other stock market share, many factors like socio-economic conditions affect the latest precious metals spot prices in the market. Hence, trading in gold bullions is a dynamic affair.
If you plan to invest in precious metals, this article will explain the factors that determine the spot prices of these valuable assets.
Influence of the US dollar value on Precious Metal Prices
The US dollar is the international currency for worldwide trade and finance. The global economic market, inflation rates, oil prices, and unemployment rates are some factors that affect the US dollar rate.
When the US dollar value increases, the prices of precious metals like silver and gold remain low. Similarly, if the dollar rate of exchange reduces, the prices of these metals increase considerably.
The Law of Supply and Demand
According to Statista, China, the leading producer of gold, manufactured around 380 tons of metal in 2020.
The basic economic principle of the supply and demand chain applies to precious metals too. Here are a few ways the supply and demand rule works for each of these valuable assets.
The demand for gold bars and coins increases when the stock and currency market faces loss. Many traders prefer this precious metal, as it is a tangible and secured form of investment.
Silver is a cheaper and readily available metal in the market. It is widely used in various medical and protective equipment. Hence, the global supply of this metal is higher compared to gold.
This metal is used in many internal combustion vehicles. Hence, it is widely popular in the automobile industry. It is not readily available. Hence, the supply for this valuable asset is lower compared to other precious metals.
Palladium is used in many industrial sectors. Hence, the demand for this metal is always reasonable and does not reduce quickly.
With the advent of newer technological applications in industrial sectors, there is an increase in the mining of precious metals worldwide.
Sudden Economic Instability
When you witness an economic breakdown globally, stock market shares and exchange rates of currencies decline drastically. In such situations, having a diverse investment portfolio of precious metals can be a life-saving option.
Despite economic or political downturns, the value of these metals increases or remains unchanged.
Changes in Government Regulations
Changes in government regulations that include budget decisions, foreign investment, and industry procedures affect the value of precious metals.
These changes will affect the dollar value so that traders can calculate the latest precious metals spot prices based on these fluctuations.
Investors who rely on a fixed income suffer losses from lower yield when interest rates for a currency decrease. Having multiple investments in precious metals can ensure a steady income in such cases.
High Inflation Rate
When there is inflation in the economy, rates of all commodities increase invariably. Here is when the value of precious metals increases.
As you may now understand, precious metals are more secure than other investment opportunities. With low risk and volatility, metals are one of the best options to keep your money safe and get higher returns with time.