The banking collapse of 2008 has had major effects on the way people approach their investing strategies. Whereas, in the past, the right mix of stocks and bonds could give a portfolio what seemed to be a sufficient level of diversification, most investors are not quite so comfortable with diversification just within paper investments.
The issue is that most stocks and bonds rise or fall due to changes in currency value. When inflation is up, the real value of those stocks drops, and even with a wide variety of stocks in your portfolio, currency troubles can cause major problems for your investing strategies.
That’s what makes investing in precious metals such an attractive option. These metals hold value regardless of the strength or weakness of the dollar, and they have, in fact, become more valuable as investors have grown wary of dollar-backed stocks and bonds. A good understanding of how to weigh the can help an investor make smart investment choices with materials like gold, silver, platinum, and palladium, and smart predictions can lead to great profits as more people invest in precious metals.
The most dependable material for holding valuing over time, gold has been in circulation as a currency for the better part of the last five thousand years. Gold is valued for both its aesthetics and its more practical uses, and cultures all over the world consider gold to be highly valuable.
When considering the precious metals outlook, it’s important to look at the factors driving the price of gold at different times. Gold is extremely valuable in times of economic uncertainty because it is not dependent on the value of any currency. The price is largely attached to sentiment toward the material (demand, rather than supply coming from annual production), and the sentiment for gold is currently very positive, as evidenced by its huge increase in value over the past decade.
Silver is a more volatile investment, but it is also one of the most enduring forms of currency, having been appreciated as a valuable material for four thousand years.
Silver has a number of industrial uses, and changes in demand from these industries can have a significant effect on the price of silver. Just as the rest of the precious metals outlook seems strong, silver is on the rise, recently reaching record high prices.
This is another material that is highly valued for its practical uses—including in computers, medical equipment, and auto parts—but platinum is also coming into fashion for its aesthetically pleasing appearance. When analyzing the precious metals outlook, it’s important to understand the historical behavior of platinum as an investment. Whereas its very low production rates have made it extremely valuable at times, economic uncertainty can drive the price down.
The outlook for palladium is perhaps the most interesting of all of the precious metals. This material is softer than platinum and is used in catalytic converters, which are auto parts that reduce harmful emissions. The palladium market boomed in the early 2000s when the United States instituted stricter emissions standards, and palladium could receive another huge boost if emerging nations like China start to institute similar requirements.