Main Factors That Affect How the Precious Metals Market Behaves

The precious metals market is certainly one that investors have taken a keen interest in especially in the recent past. And there is good reason for this, because this is a very important alternative market for investors and speculators alike. But although we can easily know the price of Gold or silver, understanding the market is a lot more involving than just knowing the prices. The first major step towards understanding how this market behaves is to know the factors that affect the behavior of this market. Your Personal Financial Mentor informs you on some of the main factors that affect the behavior of the precious metals market today.

One important factor is the behavior of the major world currencies, especially the United States Dollar and the Euro. Well, many investors usually rush to buy precious metals as a form of safe haven trading when the value of the dollar is unstable. That is to say that basically, when the value of the US dollar is not stable, the demand for Gold and silver rises, and so does their price. Likewise when uncertainty eases over the US dollar and other major world currencies, the demand for precious metals decreases, and effectively, the prices reduce too.

Another factor is the industrial price of these metals. The industrial prices refer to the prices of Gold and silver used in manufacturing industries rather than for trading as precious metals. This price usually depends on industrial growth, and ultimately, it influences the prices the precious metals market. Although a few people have argued in the past that this influence is minimal, recent industrial developments, especially in the developing countries like China and India have broadened their effects to the precious metals market.

Precious metals also compete against each other. It may sound a little strange, but the price of one precious metal influences the price of the others. Here is how: When the price in the Gold market rises too high, many investors will rush to the silver market as an option, and vice versa. Therefore, it is difficult to understand the behavior of one precious metal independently. You will have to look at the other precious metal markets too because the effects are usually spread across.

It is also important to mention that when trading in the precious metals market, it is best to buy the actual metals rather than just the papers of certification. 

Categories: Precious Metals Market

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June 16, 2013 Main Factors That Affect How the Precious Metals Market Behaves