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The Trading of Precious Metals in an Uncertain Economy | What You Need to Know

The Trading of Precious Metals in an Uncertain Economy | What You Need to Know
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While the coronavirus pandemic remains primarily a health issue at its core, it has also had a huge socio-economic impact across the globe. The world’s financial markets have also been impacted, although some assets have performed relatively well amidst the rising tumult.

Take gold and similar precious metals such as silver, for example; which have benefitted from huge demand throughout the pandemic as investors have sought out so-called “safe haven” assets that offer a secure store of wealth during turbulent times. 

We’ll explore the nature of precious metals below while asking how they’ve fared in 2020 and how you can capitalize as an investor.

What are the Main Types of Precious Metal?

Gold remains the market-leading precious metal and one that remains the safe-haven asset of choice during times of economic turbulence.

This was borne out during the pandemic, as the price of gold has grown by 28% since the beginning of the year and even reached new highs above the $2,000 barrier in August

Gold remains one of the most predictable and durable assets in the marketplace, as it grows in value during periods of recession and depreciates in times of economic growth. It also has a finite supply, which helps to sustain higher values across the board.

Silver also provides a form of security and physical wealth during times of recession, although it’s best-known as an industrial metal.

This means that silver is more likely to achieve incremental growth as economies begin to recover from a recession or natural disaster, and for this reason, finds itself more vulnerable to volatile price movements.

Remember, silver is widely used in batteries and superconductor applications, while it also underpins microcircuit markets that are worth billions around the world.

Investors can also access platinum, which is widely traded around the globe on the global commodities market.

Interestingly, it has a higher price per troy ounce than gold, particularly during routine periods of market and political stability. This is due to its finite and increasingly rare nature, with considerably less platinum pulled from the ground naturally than any of its counterparts.

How Can You Capitalise on the Precious Metal Market in 2020?

While gold’s value may have retracted slightly due to a huge sell-off in November (as talk of a coronavirus vaccine intensified and the global economy began to showcase a recovery), it remains a viable asset as 2020 draws to a close and 2021 gets underway.

In fact, some commentators are predicting that gold will return to its peak of $2,000 over the course of the next couple of months, and in this respect, now may well be the ideal time to invest in this safe-haven asset.

However, silver may also be poised to enjoy significant growth in the coming months, despite the precious metal’s price having fluctuated wildly throughout the final quarter of 2020 against the backdrop of rising volatility.

The main reason for this is that the US Dollar has been negatively correlated to the silver market for some time, while the greenback has continued to underperform due to election-related volatility and rising coronavirus case numbers in North America.

So, it may be worth charting the performance of the US Dollar Index in the coming weeks, as the greenback depreciates and the price of silver begins to rise incrementally.