Strength Of The Precious Metals Against The Dollar
In times of world economic crises and weakening of the dollar, investors discover the resilience of precious metals. Gold and silver enjoy a good reputation and are likely to protect investment portfolios during market turmoil.
Experienced investors can attest to the advantages of precious metal investments when other investment assets, such as stocks, bonds or foreign currency are characterized by volatility. Tests carried out from time to time indicate that a gold or silver asset purchase significantly balances and stabilizes an investment portfolio.
Recently, this trend has become so much more apparent in face of changes in the US dollar's status. Over the last 100 years, the dollar has been considered the strongest currency in the world, but more recently, the dollar's status has weakened in relation to the past. In such conditions, precious metals which have gained a good reputation over thousands of years as secure and reliable assets, take on valuable investment channel status.
Economies in Crisis
In order to understand what has been happening to the dollar recently, it is necessary to take a look at the world economies. Over more than a decade, from the financial crisis of 2008 to the current coronavirus crisis, most countries have been coping with a challenging economic situation.
The ongoing crisis has caused a rupture of all accepted government rules. In recent years we have seen an unprecedented amount of printed money. Trillions of dollars have flooded the markets aimed at forcing world citizens to invest, purchase and set the slackening wheels of the economy in motion once again. In actual fact, the results of this operation have remained in dispute.
On the one hand, printing money without limit has still not brought an end to the economic crisis. On the other hand, it has resulted in an enormous supply of money, of dollars in particular, in such a way that there is an increased fear of inflation and devaluation of currency. There has also been an unprecedented rise in debt among the countries. In a particularly bad scenario, countries won't be able to continue financing these enormous debts and their currencies - headed by the dollar – will devalue.
Interest rates down at lows, Inflation climbing higher
Another significant trend concerns US government bonds which have generally been considered the most secure investment asset in the world. These bonds have been trading recently at negative interest rates. That is to say that those who have chosen to invest in them have actually lost money. It is estimated that this situation will continue into the foreseeable future, as long as the world finds it difficult to emerge from the economic crisis.
Another area in which the dollar is under threat lies in the strengthening confrontation between the United States and China. The Asian power which is expected to become the world's greatest economy in the coming years is competing with the United States in every field. China is already a world industrial center and the Chinese are rapidly moving forward in all that concerns technological innovation, international trading and academic achievement.
In the past, the Chinese didn't dare question the strong status of the dollar. Today, they are lowering their dependency on the American currency and encouraging countries of the other continents to conduct their transactions in Yuan.
At the same time, China, Russia and other countries challenging the United States, are increasing their gold reserves in order to gain independence against the dollar. In face of this, the United States is purposely decreasing its involvement in what is happening in the world.
Precious Metals – An Anchor of Stability
Investors are having to cope with interest rates that don't yield anything, as well as disturbing inflation rates which are on the rise and fear for the status of the dollar.
This is the moment when many investors discover gold. The glistening metal, often referred to as the "hard currency", is not controlled by any country and is not dependent on political decisions. Its value is derived exclusively from the fact that it is a natural and rare asset, for which demand has been high and stable since the dawn of human history. Such is also the case with the other precious metals: silver, palladium and platinum.
In the past, there have been arguments against investing in gold when the metal hasn't yielded interest. In times of negative interest rates, however, the benefits of investing in precious metal increase. In 2020, gold crossed the 2,000 dollar-an-ounce level for the first time. A look at this over a longer term shows that over the last 50 years, the price of gold has multiplied by 50.
Economists at the Goldman Sachs Investment Bank said last year that, "Gold is the currency of last resort, particularly in an environment like the current one where governments are debasing their fiat currencies and pushing real interest rates to all-time lows.” There is genuine fear as to how long the US dollar will remain the world's reserve currency.
Gold Bars - The Perth Mint, The Holy Land Mint, Pamp
How to Invest in Precious Metals
Precious metals are traded around the world at exchanges, where their prices are fixed continuously, 24 hours a day, 365 days a year, according to demand and supply in the market. The accepted unit of weight for pricing of precious metals is a Troy Ounce, equivalent to 31.1 grams.
A simpler way of investing in precious metals is to purchase assets made of gold or silver, such as bullion coins and bars. The Israel Coins and Medals Corp. website presents a large selection of such assets, all of which are excellent for investors, with prices starting at only a few hundred dollars.
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The information contained in this website should not be construed as investment advice or as a substitute for investment advice suited to your own individual financial needs for purchase or investment, investment activities or transactions, or as recommendations or opinions as to the benefits of investing in gold or in any other specific products. The information contained in this website does not constitute an alternative for investment advice and you should not act upon it, before seeking advice adapted to your own personal situation and needs.