Gold and silver are the most reliable financial instruments. They help protect money from economic downturns and financial crises. Investments in precious metals keep your capital purchasing power. Gold and silver significantly reduce the risks of the investment portfolio. Seasonal fluctuations in precious metal quotes can be used to generate stable revenues.
What is the difference between precious metals and other financial instruments as objects of investment?
In the modern world, a large number of securities are circulating. Their value depends on three components: the state of the economy and the stock market as a whole, the industries and sub-sectors represented on the stock market, as well as individual firms and companies whose securities are traded on the market. Additional factors are sentiment in stock markets, enterprise development plans and analyst opinions. Future income from securities depends on the conditions of a certain segment of the stock market. This situation does not apply to bonds and promissory notes with which the risk of insolvency of the issuer is associated.
Investments in precious metals have minimal risk
Let us cite the main arguments in favor of this statement:
1. The lack of binding of precious metals to the government of a certain country protects their value from the influence of the economic and political processes of an individual state. Global financial crises led to higher gold and silver quotes, which turned out to be very popular as means of protecting savings. Therefore, in unstable times, investors convert huge amounts into precious metals.
2. There are two types of buyers on the precious metal market: individual and institutional investors. They have different motives for consumption. Therefore, a decrease in demand from some buyers may turn out to be the opposite effect for others. For example, a decrease in demand from individual investors as a result of a decrease in purchasing power affects the decline in quotes. The low price of precious metals attracts institutional investors.
3. Yellow metal is an international means of payment. Dragmetall can be bought and sold anywhere in the world. The reserve of almost all the states of the world consists partly of gold. Central banks and other financial institutions own nearly a quarter of its global reserves.
The value of precious metals through the millennia
The success and wealth of a person once depended on the amount of gold and silver that he owned. In ancient Novgorod there was a special association of merchants "Ivanovo Hundred." Its members enjoyed honor and various privileges. To become a participant in such a society, it was necessary to add 50 ingots of silver to the treasury, with a total weight of more than 50 kg.
In the old days, products from precious metals were stored in caches, buried in the ground, lowered to the bottom of the well, walled up in stone walls. At the end of the 19th century, a large treasure with precious coins was discovered in the Kiev Pechersk Lavra. The total weight of the treasure was 287 kilograms - 27 kilograms of gold and 270 kilograms of silver coins.
During the First World War, the Allied States used gold to secure mutual obligations. During World War II, England and the USSR bought equipment, weapons and food from the United States for gold bars. By 1949, in Fort Knox, in the state of Kentucky (USA), a fifth of the gold produced at that time was concentrated - 21.8 thousand tons.
What factors affect the quotes of precious metals?
Prices of precious metals vary depending on various macro and microeconomic factors. First of all, we are talking about changes in the legislative framework and economic policy of the state, military operations, etc.
When gold and silver functioned as money, the purchasing power of coins and banknotes often declined during periods of military operations and economic crises. For example, at the beginning of the 17th century, the Russian ruble depreciated 5 times. The German mark during the First World War depreciated thousands of times!
The purchasing power of money then depended entirely on their provision with yellow metal. As the total mass of gold decreased, the purchasing power of money decreased. By the middle of the 20th century, the gold standard was abolished, giving way to modern monetary policy.
How well to invest in precious metals?
Before investing in gold and silver, everything must be carefully planned. To do this, you need to answer four questions: when to buy, how much, for what period and in what form. The precious metal market is seasonal. Quotations change periodically throughout the year. A favorable period for buying gold at a minimum price is the beginning of summer. You can sell it more expensive at the end of autumn.
There are two strategies for investing in precious metals: long-term and short-term.
Price increases in the precious metals market take longer than in the securities market. Changes in gold and silver quotes are influenced by global factors: political and military conflicts, higher investor incomes, changes in the exchange rate of world currencies, rising prices for major groups of commodities, etc. When the quotes of precious metals for a long time, they talk about the "bullish" trend. As history shows, in the long run, this is the trend that prevails. Investors profit from the possession of precious metals not immediately, but a few years later.
The modern world is unstable, so the likelihood of short-term profit when investing in precious metals is very real. It is only necessary to respond in time to changes in the global political and economic environment. These events can be monitored through international communication channels. When systematically analyzing information, you can record a favorable situation and instantly respond, resulting in significant profits. It is necessary to analyze the situation in sectors that are the main consumers of precious metals, namely the jewelry and energy industries, medicine, etc.