Although some of the elements that at present have an effect on the price of silver are similar as the ones thirty years ago, there are some new aspects in play in the present market. Listed below are a few of these aspects.
1. Geopolitical Crisis – whenever a global emergency occurs it impacts the stability of countries within a specific region. Investors tend to move a lot of their assets to gold and silver in order to protect their money. The increased demand in gold coins is brought on by tensions within the Middle East and the ongoing threat of global terrorism. More investors are now investing in bullion because of its stability in value. Unluckily the augmented demand has made the current price of gold and silver increase as well.
2. Inflation – the latest financial crisis in the United States has raised concerns regarding the possibility of inflation. Traders are concerned that the purchasing power of their existing assets might be significantly affected by inflation. This has led to more and more traders converting their assets into precious metals to be able to protect its purchasing power just in case of any future inflation.
3. Low Yields in Established Investment Options – in the past couple of years, traditional investment alternatives like bonds had a very low yield. While some fixed income securities and cash market investments did fine, more and more investors thought of investing in precious metals for enhanced yields.
4. Debt Deficits of Certain Nations – the latest debt crisis in Greece and other nations within Europe has produced a demand for safe haven investments within the region. Lots of investors are clamoring for gold and silver and Treasury bonds to hedge against further foreign currency risks. This results in a spike in the cost of gold and silver.
5. Speculation – speculation can occasionally significantly affect the price of precious metals. If traders see that many trustworthy fund managers have acquired great positions within the gold and silver market, interest in precious metals will increase. This then results in an increase in demand and in consequence, an increase in price.
6. Emerging Market Economies – a lot of emerging markets in Asia have grown drastically during the past few years. The rising incomes of the people within the markets have amplified the demand for precious metals investments. Plenty of the newly rich citizens of these countries are looking to those who sell bullion for investments.
Just like some other commodity, a rise in demand will result to an increase in price. The good thing about precious metals is the truth that demand for it is one of the few factors that openly affects its price. When compared with other commodities, precious metals is not stricken by political or economic instability directly. Even if governments and economies fall, the cost of gold and silver will keep on being stable. It is only when a significant number of traders start planning to buy bullion in the market that the cost will surely increase.