How The Precious Metals Outlook Is Influencing Investors

How The Precious Metals Outlook Is Influencing Investors 5.00/5 (100.00%) 9 votes

With all of the economic crises taking place around the world, it shouldn’t be surprising to learn that many investors are a bit skittish when it comes to investing through traditional means. The housing market may seem to be rebounding. The stock market may seem to be performing within historically established bounds.

But the continuing layoffs, closing of locations, and dismal sales reports coming from the nation’s largest retailers tell a different story all together. Many economic experts cite the poor fiscal policies of the world’s leading nations and financial institutions as the primary cause of these problems. When one considers the fact that little is happening when it comes to changing these policies, it’s easy to see why the savviest investors are still a bit skeptical to rely on traditional means of investing. So, where are they putting their money?

The Precious Metals Outlook Caught Their Attention

Precious metals have been viewed as one of the safest investments ever since the Fed abandoned the gold standard in 1971. Even before that, though, investors saw the opportunity they provided. With virtually no correlation to any economy or market, they serve not only as a form of wealth preservation, but also as a hedge against inflation.

In certain situations, such as those where inflationary policies are likely to drive the inherent value of a fiat currency downwards, the precious metals outlook becomes stronger. There is virtually no other form of investment, including many other commodities, where this is true. Because of this, many see the continuing fiscal irresponsibility of the world’s most dominant economies as improving the precious metals outlook.

Why Precious Metals Are Truly Uncorrelated Investments

Fiat currency, also known as paper money, is used in virtually every economy today. Theoretically, these currencies derive their value from their nation’s gross domestic product. In reality, their values are determined through government regulation.

This means that a country could simply “print more money” as the need arises. While there are some short-term benefits to doing so, this practice always leads to inflation, which devalues fiat currencies. As a direct result, this leads to the devaluation of investments based on those currencies.

Gold, silver, platinum, and palladium can’t be created on demand. The only way to increase the world’s supply of precious metals is by mining more of them. Because of this, it’s impossible for their value to be inflated. This has the pleasant result of maintaining a proportional value to the actual purchasing power of international currencies.

How Does This Impact the Precious Metals Outlook for Investors?

Many investors still fear the potentially negative consequences of the irresponsible fiscal policies in place in many of the world’s countries. Because of this, they’re eager to find a means of investing that can help protect their assets over the long term. Precious metals seem to be just what they’re looking for.

Like all investments, the precious metals outlook is subject to the occasional rise or decline in value, and market activities can be influenced by speculation. However, historically speaking, the value of all precious metals has continued to rise in a rate that is inversely proportional to inflation. When speculation causes the value of gold or silver to rise or fall, it’s merely incidental. The markets always balance themselves out.

Investors are turning to precious metals to protect themselves from the potential economic catastrophes that many experts of economics are predicting. Regardless of whether or not their predictions come true, the very nature of precious metals as uncorrelated investments makes them a relatively safe long-term strategy. In any case, they make for an ideal form of diversification in any investor’s portfolio.