When you are new to the world of investing in precious metals, there is a lot to take in to understand how it works and what affects their value. Traditionally gold has been an excellent hedge against inflation, as its value has always gone up higher than inflation rates. However, many factors can affect the price of gold and other precious metals, which you may not be aware of and need to know.
Below are some of the factors that can influence the price of precious metals that you should consider before making your investment.
The Central Bank Reserves
Central banks worldwide will hold reserves of paper currency and precious metals. As the banks start to swap out their paper currencies and invest in precious metals such as gold, silver, or platinum, this affects the price of the precious metals. When this happens, it will typically push the prices of gold and other precious metals up, depending on what they are buying with their currency reserves. However, other factors can also affect the cost of precious metals in the investment market.
The Value Of The US Dollar
As the US dollar is the global currency for trade, it will have a knock-on effect on the price of gold and other precious metals when this goes up and down. You will find that when the dollar is weaker, the value of gold and other precious metals increases, while the dollar increases in value, it adversely affects the value of precious metals. You will also find that as inflation rates rise, your precious metal investments will also increase in value. You can use these factors to help you select the best time to invest in precious metals and ensure you maximise your investment.
Demand For Gold In Other Sectors
You can also find that the demand for gold and other precious metals in various sectors can also affect their value. The jewellery sector has a massive demand for gold, silver, platinum, and other precious metals, and when this demand goes up, so does their value, making it essential to buy from Brisbane gold dealers who are known to provide great deals. You can also check dealers near your location if you live outside Australia. In 2019, approximately half the demand for gold was for jewellery, and the countries that purchased the most gold jewellery this year were India, China, and the USA. Gold is also often used in electronics as it has excellent conductive properties, and many of our everyday devices have gold, including your Smartphone. As demand increases, so does their value, so you will see the prices go higher.
Demand From Investors
You can also find that the demand from people wanting to invest in precious metals can also affect their value. In 2019, the need for gold from various investment vehicles was around 1,272 tonnes, equalling approximately 29% of the total demand for gold. Since the global pandemic started, many people have invested in gold and other precious metals. As such, the price has increased significantly, and as production was also affected, it also saw the price rise to record levels.