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What Factors Determine Precious Metals Spot Prices?

If you are interested in the precious metals market, you may be wondering what really affects the spot prices of the gold, silver and platinum that we buy and sell. There are a number of different factors that influence the price of these precious metals, including supply and demand, inflation, and geopolitical events.

Silver’s price action is influenced by geopolitical events

Gold and silver may have taken the lead for most of the last decade, but it is not all bad news. The latest economic stimulus in the form of the Fed’s newfound fiscal pact has the potential to revive the metal akin to a swanky sultan on a deserted island. Moreover, China is progressively building consensus with many countries, including the US in the not too distant future. It would also seem the United States has an uneasy alliance with an equally acerbic adversary. Having said that, a triadic trade may be in the cards for now. Keeping in mind the above tiffots, one must wonder what is next for this much maligned metal in the near future. Indeed, this hasty association might just be a sassy snobs’ nightmare in the making. For a while now, the US has been stomping on a number of fronts. Regardless of how it all plays out, one cannot help but be impressed at the performance of this juggernaut of a nation.

Inflation

Inflation can have a huge impact on the spot prices of precious metals, noted by Precious Metal IRA Companies. Precious metals are commodities that are considered a safe haven during times of economic uncertainty and turmoil. They’re also an effective hedge against inflation.

Inflation is a sustained increase in the general price level of consumer goods and services. When prices are high, the purchasing power of the dollar decreases, and people spend less money. This leads to increased demand for precious metals.

Investing in gold is a smart way to protect yourself against rising inflation. The price of an ounce of gold will likely keep its value over time.

Gold and silver prices tend to increase during times of economic uncertainty. Similarly, they’re affected by changes in global trade relations and interest rates.

Precious metals’ supply is limited, which means that the price is also limited. However, diversification can provide higher returns and lower volatility.

Investors worry about assets losing their value. A strong dollar will hurt stocks. But, as long as the economy remains stable, demand for luxury goods will continue.

Supply and demand

When it comes to precious metals, supply and demand are the key factors that drive spot prices. Understanding the relationship between these two elements can improve your chances of success.

Precious metals are used in a wide range of industrial and consumer applications. Some of these uses include electronics, jewelry, medical equipment, and dental devices. In addition to their use in industry, these metals are considered safe-haven assets during uncertain times.

Supply and demand affect the price of virtually every good. A high demand for a good can increase its prices, while a low demand for a good can push it down. Similarly, a surplus of a good can create a price drop.

The law of supply and demand applies to every type of commodity. However, it does not necessarily apply to all types of metals.

While a strong dollar can have a positive impact on the value of gold, it can also weigh down on its price. This is because it reduces the value of foreign currencies, which in turn increases the price of gold.

CFTC vs Southern Trust Metals

There is a clear trend toward more CFTC cases involving attempted market manipulation. In one recent case, the defendants engaged in a large-scale, eight-year scheme to manipulate the spot prices of precious metals through a series of deceptive orders that were intended to inject false information into the markets. This case, involving two former traders with JPMorgan Chase & Co., was one of the most watched legal battles in recent years.

Throughout this time, the CFTC aimed to punish wrongdoers and protect market participants from manipulative activity. However, the level of proof required to prove actionable manipulation was incredibly high. Hence, many of the CFTC’s enforcement efforts were stymied.

In October 2018, John Edmonds pleaded guilty to conspiracy to engage in spoofing. He and Christian Trunz are currently awaiting sentencing. The court found that a large number of circumstantial evidence supported the CFTC’s argument that it was not unreasonable to assume that the defendants engaged in fraud-based manipulation.

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What Quarter of 2022 Was Best For Precious Metals?

If you’re like me, you’ve been keeping an eye on the precious metals market. Whether you’re in the market for gold, silver, or platinum, you’re looking to see how the market will react to various events over the next few years. And while some of the biggest developments will affect these markets, we’ve identified several other factors that could play a role as well.

Gold price

If you are wondering what quarter of 2022 was the best for precious metals, you should know that the answer is not simple. It depends on a number of factors. But the most important one is the macro backdrop.

For instance, gold prices surged in the first couple months of the year, but then they slowed down. This was because the US dollar was strong. In fact, the Fed was able to hike rates by three-quarters of a percentage point in early November, which impacted the price of gold.

As a result, the dollar continued to climb. During the second half of the year, the US dollar was up about 16% against a basket of major currencies. That may not sound like much, but it is enough to weigh down stocks and commodities.

Inflows into gold ETFs

Gold ETFs saw strong inflows in the fourth quarter of 2022, despite the global economic slowdown and higher interest rates. The gold market is largely driven by central bank policy, while geopolitical uncertainty is also contributing to its price fluctuations.

According to precious metal IRA companies, the value of gold has been linked to a collective belief that something is valuable. Gold is therefore a stable asset that can be used as a hedge against volatility in the financial markets. Its long-term performance is positive. However, it has experienced significant volatility in the past.

Gold prices have fallen around 20% since their historic highs in the pandemic. This reflects the rising inflation in the US, which is driving up energy costs. But the price of gold is expected to rebound to $1,900 by the end of 2024. In addition, investors can gain exposure to physical gold through futures markets or ETFs.

China’s demand for platinum

China has been identified as a key market for platinum. However, a new report from the World Platinum Investment Council (WPIC) finds the country’s demand for platinum is not yet fully tapped. The organization says the country’s imports are at least 1.2 million ounces higher than its demand.

According to the WPIC, it will be another two years before the country’s supply and demand are in balance. This is due to strong imports into China, as well as large flows into exchange-traded funds. As a result, the platinum market is expected to experience a deficit in 2023.

Although there is no data available for Chinese consumption of platinum, WPIC says the country may be stockpiling the metal in preparation for future demand. In addition, China is planning to increase the amount of platinum used in catalytic converters for heavy vehicles.

Interest rate hikes

Gold was one of the best performing asset classes in the first half of 2022. This was due in part to hopes for a less hawkish Fed. However, the economic slowdown remained, which had a negative impact on living costs.

The Fed’s interest rate hikes kept the markets glued to the Federal Reserve’s decisions. However, they were also paired with geopolitical uncertainties. Combined with the US dollar’s strength, gold prices were affected.

During the second half of 2022, the gold market saw a significant correction. From a March 2022 high of $2,051 an ounce, it dropped to a September 2022 low of $1,406. Despite the correction, the long-term trend was positive.

Central banks raised interest rates aggressively in 2022. But, inflation remained high. A potential recession could lead the Fed to slow down its rate hike campaign. Currently, the Fed’s target federal funds rate is 3.75% to 4%.

Silver’s volatility

The fourth quarter of 2022 is set to bring some volatility to the price of silver. Investors have been jittery about the deterioration of the economy. This is especially true in the light of rising inflation.

However, the metal is expected to have a positive outlook in the coming years. Demand for industrial applications and the green economy is forecast to grow. Also, demand from electric vehicle manufacturing will increase. During recessions, industrial demand for silver drops. If the industrial sector returns to normal, investors can expect handsome returns.

Besides industrial demand, silver demand also benefits from a growing consumer electronics market. Demand in the jewelry and silverware segments will reach 300 million ounces this year. Moreover, strong inventory replenishment will drive demand in the silverware segment.

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