Why Does Uncertainty Benefit Gold And Other Precious Metal Values?

Uncertainty is the result of a lack of predictable expectations. When things progress in an orderly and predictable manner, investors consider this a positive and risk-on market condition, because expectations allow for a logical progression to a potentially anticipated end. But when circumstances intervene having the capability to suddenly and unexpectedly derail a logical progression, the need for a hedge or safe harbor increases. And because gold, silver and other precious metals have a long and illustrious history of shining their brightest, when risk-on investments crumble or evaporate completely, interest in the safety and security of precious metals increases during these times. The greater the political and or economic uncertainty, the more potentially exponential the demand will be for precious metals.

The recent French election is a good example. Demand increased substantially for precious metals when French citizens faced the fact that a Le Pen victory could have spelled greater isolation and even succession from the European Union. Once the threat dissipated, investors returned to a more risk-on attitude. The world continues to watch for progress in the U.S. as healthcare, tax reform, and business deregulation policies continue to be developed. A potential U.S. interest rate hike continues to provide headwinds to the increase of precious metal prices, but few disagree with the fact that precious metals need to be a component of every financial portfolio, for appreciation as well as safety in the long term.

Investors seem to be somewhat uncertain about rising gold prices, but the reality is that it’s inevitable in the long term. Members will most probably vote to continue supply limits at the upcoming OPEC meeting, so prices will maintain or increase. As oil prices rise, so does inflation. As inflation continues to increase, so too will demand for gold and other precious metals, which serve as a definitive inflation hedge. Currency wars are becoming another source of concern for the stability of the global trade and financial system. Slowing global economic growth is also likely impact equity markets, generating even greater safe have demand for precious metals.

The most important fact to realize about any discussion having to do with precious metals is that by nature, precious metals are “precious,” meaning valuable and in short supply. In today’s nanosecond trading world, it means that the very limited universe of physical precious metals available at all, could be snapped up in an instant. Non-existent supply means unquenchable demand. So, in a crisis or panic situation, there will be haves and have nots. If you’re a have not, then you most probably can’t get precious metals at any price, which should help you to understand, in no uncertain terms, that you don’t want to be without physical precious metals. And on top of everything else, precious metals are a universal currency. Protect your portfolio and don’t be without gold and silver, if the music stops.

Although the information in this commentary has been obtained from sources believed to be reliable, American Bullion does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice. American Bullion will not be liable for any errors or omissions in this information nor for the availability of this information. All content provided on this blog is for informational purposes only and should not be used to make buy or sell decisions for any type of precious metals.