Gold and silver have always been considered the most precious metals that can be bought as long-term investments. As time passed, technology grew tremendously in line with the world economic scenario.
Now, people choose to invest their money in precious metals for stable returns on investment and risk-free business. Here’s what the market looks like for precious metals in 2022.
The Economy Backdrop
The world economies are getting transformed into macroeconomic regimes with tightening policies by each government. Money tightening policies and global inflation have led to negative nominal yields in the past few decades.
The US, Europe, and China, the three largest global economies, have very negative macroeconomic data. The cost-push inflation is driven by the stark difference in the global demand for commodities and their supply.
Why Would the Precious Metal Market Be Volatile in 2022?
Though the global economic conditions are not inspiring, precious metal investors can expect the good days to return.
If you look at the historical data of the global economy and precious metals, whenever interest rates have moved higher and led to real yields hovering in negative territory, there has been a surge in demand and prices of precious metals. Due to the rising global inflation and macro economics’ negative data, the demand for precious metals started strongly in 2022.
The increased use of precious metals in the catalytic converters has led to a significant increase in demand for precious metals like platinum and palladium. These catalytic converters are used in the automotive industry. Also, the demand for cars has increased globally, so the demand for precious metals is expected to rise in 2022.
Global Events Influence Markets
The global economy and the demand-supply of precious metals also depend on global events like wars or economic depression. For example, suppose a country that is a significant producer of precious metals enters a war with another country. In that case, the precious metals’ production and supply chain are disrupted. This results in the supply crunch amidst high demand, leading to a surge in precious metals prices.
If you look at the global scenario, there is a major tussle between countries, leading to instability of the economies. An unstable economy directly affects industrial output, and the stock markets plunge. In such economic conditions, investors start looking for other investment options like precious metals that continue to hold their value even in the downfall of economies.
Countries with economic pressure have no other option but to liquidate precious metals in the markets in exchange for currency. Looking at the current world situation, many countries have troubled economies due to ongoing unrest or proxy wars.
These countries might liquidate their precious metal reserves to bring their economies on track. All this will result in a market flooded with precious metals, and there will be a buying frenzy that will lead to a spike in the prices of precious metals.
Disruption in the Global Economy
The worldwide pandemic disrupted the mining industry, leading to a shortage of precious metals like palladium and platinum that has many industrial uses. Hence, there has been a sharp increase in the prices of these metals.
Thus, as the global economies try to stabilise, precious metals prices will continue to rise. It means investing in precious metals or holding on to your precious metal investments seems like a good idea in 2022.