The wildly fluctuating valuation of gold and silver on the global market tempts analysts and pundits to attempt to guess precious metals’ next move. As with speculation in other commodities, choosing to play the guessing game as often yields wrong answers, as it does correct ones.
What are the factors that affect the rise and fall of precious metals commodities? The most crucial concept to recognize about fluctuations in precious metals prices is that the supply of gold and silver is finite. By contrast, the supply of any fiat currency can be manipulated at the whim of any government that uses it as a medium of exchange.
Rare metals cannot be created, although many attempts have been made throughout ancient history. If silver and gold could be found or created by any other method than by recovering already existing supplies, their intrinsic value would vanish. Such is the fate of paper currencies, whose supplies continue to rise in the wake of worldwide fiscal upheaval.
Third party risk is diminished to zero when you have only two metals that stand for actual money. Silver becomes even more valuable, as its stockpile is consumed for industrial purposes.
The fiscal stimulus that has come to be known as quantitative easing involves the creation of paper currency. Viewed recently as one of the few measures left to stimulate waning economies, the money supply of Europe , the US and the UK are rising at alarming rates.
In the long term, as investors seek to protect their hard earned savings from the ravages of inflation and currency devaluation, the prices of precious metals have no place to go but up.
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