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 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.