Investing in bullion is a smart way to diversify your assets and gain exposure to an asset that has the potential to perform well under adverse economic conditions. You gain a hedge against inflation and an asset that has historically done well when stock markets are in turmoil.
That said, if you’re keen on always earning the largest profits you can from your assets, it helps to pay attention to the price of gold and silver and understand the market factors that can move the needle. Paying attention to the prices at which you buy and sell your bullion will help you calculate your margins after costs and find the perfect times to sell your bullion.
Start learning about what moves the price of bullion and become a smarter investor today.
#1 Recession Expectations
A great deal of time and energy is expended trying to predict when the next recession will happen. Analysts have gotten pretty good at it, but governments also do their best to introduce policies that will avoid or mitigate the impact of recessions, so it’s difficult for the retail investor to really know when the next one is coming.
Recession expectations can have a major impact on the price of gold. The more investors are convinced that a recession is on the way, the more capital they shift out of equities and into hard assets like commodities and bullion.
What does this mean for everyday investors? Periods of strong economic growth are generally good times to buy bullion, as you may be able to take advantage of lower prices, while recessions can be great times to sell.
#2 Interest Rates and Inflation
These two factors often work in tandem and have push and pull effects on gold. High inflation reduces the value of currency, and investors know that gold is often an effective hedge against inflation, raising demand and prices.
However, central banks often raise interest rates as a way of combating high inflation. This can raise the returns on assets like bonds, which tend to compete directly with bullion. With these two factors working together to affect the price of gold and silver, it can be difficult to thread the needle and find the optimal time to buy or sell, but they’re important influences on the bullion market.
#3 U.S. Debt Ceilings – And Global Debt
The U.S. debt ceiling is always a contentious political issue. The largest economy in the world has placed restrictions on its own ability to borrow, such that it needs Congress to raise the nation’s borrowing limit every few years. Each time, it becomes an opportunity for politics to get in the way, and while the U.S. has never defaulted on its debt before, each new debt ceiling debate comes with the potential for an unparalleled crisis.
If the U.S. failed to raise its debt ceiling, it would quickly start to default on payments. The resulting chaos would destabilize global markets and have widespread repercussions well outside the U.S.
Global debt levels can also cause concerns among investors. The lengthy Eurozone Debt Crisis of the early 2010s, when major European economies such as Spain, Greece, and Ireland, was one of the factors that contributed to elevated gold prices of the time.
Most everyday investors won’t be able to predict when bullion prices will go up or down, but understanding these basics can help you make informed investment decisions.
