How does the law of supply and demand affect gold and silver spot prices on the market?
Precious metals like gold and silver are a popular way for people to invest today. Not only do these metals have intrinsic value, but they are also a great hedge against market volatility. As a general rule, economic volatility is a positive thing for the price of precious metals. With such unpredictability in the modern world, precious metal prices are likely to continue rising in the coming years.
Before investing in any asset, first it is vital for investors to do some preliminary homework. There are various strategies for investing in physical precious metals. For starters, if you want to take your investing to a new level, it is important to work with a company you can trust.
Many experts agree that precious metals are a reliable way to earn a steady, long-term return on your investment. However, you should make sure you are prepared to ride out any temporary drops in the price due, in part, to the well-known law of supply and demand.
What Impacts Gold and Silver Spot Price?
Several variables impact the spot price of precious metals.
One of the biggest selling points of precious metals is that there is a value in these metals outside of investing. Gold is used in a variety of chemical and industrial processes. Silver is used in the manufacturing of many computer chips. The many modern uses of precious metals add value to different processes.
A primary factor that influences the price of precious metals any given day is demand. Although it sounds simple, the more people that demand a commodity, the higher its price will go. There are many reasons why the demand for precious metals is expected to increase, which means now is a great time to invest in these metals.
The supply of the metals is also a huge factor. Each year, tons of precious metals are mined from the ground. If the supply is larger than what industry professionals planned on, the price may drop. There is an inverse correlation between the price and the overall supply of an item on the market. The more rare something is, the more that people are willing to pay for it.
Although the law of supply and demand is a simple concept to understand, the actual valuation calculation is extremely complex.
Other Economic Factors Outside of Supply
There are also other factors outside of supply and demand that affect the spot price of precious metals.
For example, gold has always been a hedge against inflation and a stable protection against economic volatility. If inflation starts to increase, investors typically add more gold to their portfolio. Inflation has been called the silent killer of portfolios by many retirement planners. Instead of holding cash, which can erode in value, investors can hold physical gold or other precious metals that will increase in value over time.
As a result, any major negative world events and economic downturns tend to increase the price of precious metals. With increasing global threats to many nations, many investing experts believe that precious metals will continue increasing.
As an investor, learning how to buy into price weakness is a great way to make money.
The Importance of Timing Your Bullion Buys
The best time to buy an investment asset is when the price is down. However, this is the time when investors least want to purchase something. If you want to start adding precious metals to your portfolio, there are two strategies to consider.
Some investing experts believe that timing the market is impossible and you should just invest money into an asset class at regular intervals. For example, this could mean you invest $1,000 into gold every three months or once a year, depending on your financial goals.
Other investors believe in saving up their money and waiting for an asset to drop below a certain price point, and then buying. The downside with this strategy is that investing at a low point is difficult.
Depending on your experience as an investor, you may be able to use either strategy to your advantage. Both strategies require significant research and confidence in your methods for success.
Investing is a highly recommended way to build wealth over time for anyone. There are many people who do not invest enough money each month in order to reach their financial goals. Precious metals deserve a place in everyone’s investment portfolio. Now is a great time to look at adding precious metals to your portfolio.
As we mentioned in the beginning, finding a reputable precious metals dealer to buy from is a vital part of the investing process. A quality company will supply the educational materials you need to make an informed decision.
At Provident Metals, we strive to offer lower prices than our competitors. In addition, we carry a diverse selection of high quality precious metal bullion, coins, and rounds. Browse our online store if you are ready to buy precious metals at low prices, or continue learning how to invest.