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Precious metals as an investment category have always attracted investors seeking to park their money in an asset class that behaves stably and does not have volatile highs and lows. Gold and silver are hot favourites for investors seeking to hedge their risks, find a safe haven and identify a stable asset class worthy of investment during periods of uncertainty in global stock markets.
A classic example is the period from 2008 to 2011. Spot prices of gold started rising from $870 in 2008. It continued to rise, finally reaching a record peak price of $1,895 on the 5th of September, 2011. This meteoric rise was fuelled by a number of factors.
The Eurozone crisis was clearly one of the factors that led to that rally in gold. A number of European countries defaulted on their national debt, starting with Greece. In quick succession, Portugal, Italy, Ireland and Spain joined the ranks. The spiralling debt crisis led global investors to believe that the entire European economy could be headed for a collapse. So, they hedged their risk by moving their money to precious metals. Similarly, during the 2011 debt ceiling crisis in the US, investors lost confidence in the American economy and turned to gold.
According to research conducted by Citi, gold prices were likely to rally into 2018 and beyond on the back of the current geopolitical crisis. These include military attacks, the threat of global terrorism and the political situation in North Korea. Citi analysts predicted that the spot prices of gold will rise upward of $1400 an ounce and remain there until 2020. The analysts believed that a global macro-economic crisis will be an outcome of the geopolitical crisis and investors will move to gold or silver. A rise in the prices of silver in 2018 was expected due to economic and geopolitical uncertainty, but also higher demand coming from the industrial sector.
Despite studies conducted by the market pundits and precious metals experts, no one could predict the real impact of the 2020 global pandemic, which significantly boosted precious metal prices. The COVID 19 pandemic, which unfolded in early 2020 and accelerated quickly through the year, plunged the world into yet another economic crisis of epic proportions. Many of the leading economies around the world bore the brunt of lockdowns, shutting down of many businesses throughout the country. This resulted in complete economic uncertainty, falling interest rates and rising unemployment.
Many investors moved to precious metals during this period to protect their wealth against the impact of the pandemic. As a result, precious metal prices rose, and gold achieved its all-time high of US$ 2048.15 per ounce on 5 August 2020. Silver prices also rose to a seven-year high of US dollar $22.90 per ounce in July 2020. Although industrial demand for precious metals fell during the lockdown, so did production. Latin American nations like Mexico and Peru are responsible for approximately 2/5 of global silver production, however, mine shutdowns created scarcity for silver. Due to the overall escalation of precious metal prices, the gold-silver ratio also fell to 70:1.
So, if you’re interested in buying gold or silver as a hedge, or an investment or purely to diversify your asset base by adding a safe haven, it’s probably time to think and act upon it now. It’s also interesting to note that the historic COMEX spot price curves of gold and silver are almost identical. This means that gold and silver enjoy heightened demand at similar intervals. However, it’s important to note that the price ratio of gold to silver is 78:1. This means silver is more affordable and is often a precious metal of choice for investment portfolios.
At Physical Gold, our combined expertise over several years makes us an ideal choice for you to discuss how precious metals can be an important asset class in meeting your investment goals. You can reach us at 020 7060 9992.
We can help you purchase precious metals directly from our website. Our experts are always happy to advise you on what to buy and then walk you through the process of placing your order online. It’s simple and hassle free and we will fulfil your online order quickly, making it one of the easiest methods to directly acquire precious metals.
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Daniel Fisher formed physical Gold in 2008, after working in the financial industry for 20 years. He spent much of that time working within the new issue fixed income business at a top tier US bank. In this role, he traded a large book of fixed income securities, raised capital for some of the largest government, financial, and corporate institutions in the world and advised the leading global institutional investors. Daniel is CeFA registered and is a member of the Institute of Financial Planning.