There are a couple of main reasons why investors put their money into precious metals. First is economic uncertainty. When you can’t put faith in your own governments currency, people tend to start to flock to these metals as a possible safer haven. Second is low or negative interest rate. If the return on bonds, equities and real estate is not adequately compensating for risk and inflation then the demand for gold and other alternative investments such as commodities increases. An example of this is the period of Stagflation that occurred during the 1970s which led to an economic bubble forming in precious metals. Third is in a time of war or invasion. In times of national crisis, people fear that their assets may be seized and that the currency may become worthless. They see gold as a more solid asset which will always buy food, water, medical supplies or transportation. Thus in times of great uncertainty, particularly when war is feared, the demand for gold usually rises.
Like in all investments and commodities, prices are ultimately driven by supply and demand. In Gold’s case, collecting and disposal plays bigger role in effecting the price, because most of the gold ever mined still exists and is potentially able to come on to the market for the right price. Given the huge quantity of stored gold, compared to the annual production, the price of gold is effected by changes in sentiment, rather than changes in annual production.
Silver demand has increased in recent years and it is not just another shiny metal anymore. The use of silver in items such as electrical appliances and medical products has increased since 2001. New applications for silver are being explored in batteries, superconductors and microcircuits, which may further increase non-investment demand. The expansion of the middle classes in emerging economies aspiring to Western lifestyles and products may also contribute to a long-term rise in industrial usage. Even so, due to the advent of digital cameras the enormous reduction in the use of silver halide-based photographic film has tended to offset this rise in price due to the fall of usage.
PGM’s (Platinum Metals Group) refers to six metallic elements clustered together in the periodic table. The six platinum group metals are ruthenium, rhodium, palladium, osmium, iridium, and platinum. They have similar physical and chemical properties, and tend to occur together in the same mineral deposits. The platinum metals have outstanding catalytic properties. They are highly resistant to wear and tarnish, making platinum, in particular, well suited for fine jewelry. Other distinctive properties include resistance to chemical attack, excellent high-temperature characteristics, and stable electrical properties. All these properties have been exploited for industrial applications.
Platinum, together with palladium and rhodium, are primary elements in auto catalysts that control vehicle exhausts emissions of hydro-carbons, carbon monoxide, oxides of nitrogen and particulate. Auto catalysts convert most of these emissions into less harmful carbon dioxide, nitrogen and water vapor. Auto catalyst was forecast to account for almost 51% of total platinum demand in 2006 (up from 25% in 2000). Demand for platinum in auto catalysts started to increase significantly in the seventies when clean air legislation was introduced in USA and Japan. Many other countries followed this policy since then. But what about the state of the Auto Industry now? Is this the end for Platinum? With the recent economic times and the Us auto industry on the verge of bankruptcy, we see why platinum has lost over 70% of its value down from $2300, 9 months ago to less than $1,000 today. It’s pretty simple really, you need to have credit to buy or lease a car. 3 of the top named banks have gone out of business and the credit situation is in shambles. Banks aren’t even giving out loans to customers with good credit. No credit equals no car. Less cars being sold equals lower prices for platinum. Although it has had a good bottoming out period for the last 3 months around $800 I would still watch to see if these US automakers fold up shop completely.
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