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Factors that Can Help You Forecast Future Precious Metal Prices

gold bars

The current economic turmoil is giving people flashbacks of 2008. Investors lost their whole life savings as institutional giants like Lehman Brothers went bankrupt. Fast forward to 2022, and a new collapse is expected. To avoid their net worth getting completely wiped out again, these investors are now scrambling for cover by investing in precious metals.  

While for a lot of investors, making the transition is a piece of cake but for some, it can be a slow learning process. However, investors need to spend time understanding new forms of asset classes and the dynamics that determine their prices. If you’re one of these students, you have nothing to fear. We’re here to help you through the journey and teach you how you can incorporate precious metals into your portfolio effectively. Here are the factors you need to be mindful of.

Supply Side Factors

Unlike paper money, precious metals just don’t appear out of thin air and are extracted from real mines. Only a specific set of countries have reserves where the mining operations occur. For example, platinum is primarily mined in Russia and South Africa. So if supply from these mines were to get affected, the price of the material will rise until it can be restored. 

During the pandemic, mines in south Africa were closed due to labor shortages. This led to the prices of precious metals like gold and platinum rising exponentially. Similarly, when Russia invaded Ukraine, the international community put sanctions on Russia that made it tough for Russian palladium to find its way to the market. This led to palladium prices rising above $ 2,000 per ounce.

As an investor, you need to keep an eye on these events and try to see if the market is pricing based the production levels accurately. If they underestimate production levels for the year then this is an opportunity for you to enter the market and wait for prices to rise again. 

Person holding gold and silver coins

Performance of Stock Markets

If the stock market is falling heavily, it’s a sign that trouble is brewing. Today, high energy prices have led to the costs of consumer products increasing. This has created a big dent in the pockets of consumers whose purchasing power has decreased substantially. Investors’ confidence in the economy has been shaken by falling consumer demand and has seen them try to cut their losses by selling stocks while they can. Several financial experts are expecting a major economic crisis and are making the switch to precious metals. Precious metals such as gold are used by investors as a hedge against inflation. Look at the markets in the United States as well as other key stock markets such as The DAX, HKEK, and Shanghai stock exchange.

Geopolitical Uncertainty

The state of world geopolitics is another factor that can affect precious metals prices. As alluded to earlier, the Russian invasion led to the prices of metals rising. Other tensions that can have the world at the edge of its seats include the standoff between China and Taiwan or global conflicts like the War on Terror. This will lead to investors moving their money into gold by taking it out of financial investments such as stocks or bonds.

Performance of Other Assets

Over the past few years, people have been investing heavily in risky assets such as stocks and cryptocurrencies in the hope of getting rich faster. Crypto coins offered sky-high profits in a short amount of time. While some did hit the jackpot, many end up losing everything. Currently, crypto coins are performing badly. The price of bitcoin has fallen from 70,000 to under $20,000. Other less-known coins are doing even worse. 

The slump in the crypto market is also attributed to high inflation, Russia’s invasion, and rising interest rates. With the government considering banning Bitcoin altogether, things can get messy in the months ahead. Smart crypto investors are already liquidating their holdings and buying precious metals from a reliable precious metal exchange.

Demand from Central Banks

Central banks across the world are increasing their holdings of gold after dumping the dollar as they believe it will help protect their countries against financial crises exported from abroad. Countries from the Middle East and Central Asia are expected to continue buying gold in the future. As a new investor, you need to keep an eye on the price of the dollar to get cues about where the world economy is headed.

Industrial Demand

Precious metals are also used by industries to produce products for consumers. Silver is used to producing products such as glass coatings, batteries, nuclear reactors, LED chips, RFID chips semiconductors, touch screens, and even medicine

Metals such as platinum and palladium are used in industries to produce semiconductor crystals, spark plugs, sensors; explosives, plastics, fertilizers, and detergents. Platinum and palladium are used heavily in the auto sector to produce auto catalysts. Stay up to date on the number of vehicles being produced and their sizes. The more powerful the combustion engine the higher the auto catalysts would be needed to control vehicle emissions. 

To forecast the prices of these metals you will need to keep an eye on these demand statistics. 

A gold bar

Select an Affordable Precious Metal Exchange

On the lookout for a reputable precious metals investment dealer that is accredited with BBB? At Orion Metal Exchange, we enjoy a 4.9 rating on Trustpilot and enable our customers to purchase high-quality gold, silver, palladium, platinum bullion, and coins. Our in-house IRA department goes the extra mile to set up precious metals IRAs for our clients so they can keep their nest eggs protected from all the turmoil and diversify their investment portfolios. We also help with insured delivery and precious metal storage options. 

Get in touch with us now to learn more about our services.

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