Precious metal investments are topping the charts in 2016, according to several media reports.
During the first half of 2016, gold and silver financings were the most prominent, according to an article published in the Wall Street Journal. More surprisingly, lesser known metals such as palladium and platinum have managed to top charts as well. Palladium investments, for example, came ahead of silver financings during the weeks immediately following Brexit.
Financial Uncertainty Exacerbated by Brexit is Driving Precious Metal Investments
Brexit, which occurred on June 23rd, shook the financial world deeply, especially in Europe. Britain’s ill-timed decision to leave the European Union sent the sterling pound markets into a remarkable disarray. The value of the sterling pound dropped significantly following the vote. As a result, perturbed Britons and other investors all around the world seem to be on a buying gold spree to counter the falling currency value.
The financial markets saw a similar trend following the Great Recession that originated in the United States back in 2008. Investors, facing plunging stock and property values, rushed to put their money where the precious metals were at. The value of precious metals like the yellow metal, silver, platinum and palladium is inversely related to the value of currency. When the value of printed currency goes down, as it did during Brexit, the value of precious metals goes up.
It’s not just professional investors that are driving up the precious metal prices. The gold investments so far in 2016 have risen up by about 25 percent, which is highly noteworthy. This rise is largely driven by regular people — homeowners, recent retirees, and 9-to-5 wage earners. These individuals worry that their financial futures are at serious risk thanks to Brexit. Just days after Brexit, ordinary Britons voiced concerns that the banks could fail and their savings could go up in smoke. Though the banking system didn’t crash as feared, there’s still serious risk facing the sterling pound and related currencies like the U.S. dollar.
But Why Palladium and Platinum?
It’s interesting that the rise in precious metal financings is not limited to the more common precious metals, as it has traditionally been the case. Platinum and palladium, two metals almost no one hears about, have soared in popularity.
Silver-gray platinum, the better known metal of the two, is known for its inertness. It’s used to provide stability and aesthetic appeal in jewelry. Platinum uniquely doesn’t wear out easily. This precious metal is also known as a catalyst in chemical reactions. It’s prominently used by automobiles to burn fuel.
Platinum is not a newcomer to the investment scene. It’s long been a favorite among certain types of investors who have valued the platinum bullion, coins, and ingots. Most investors stay away because the price of platinum is highly volatile. Historically speaking, during economic downturns, the price of platinum has been far below that of the more popular precious metals.
Then there’s palladium, which has become the other post-Brexit investor favorite. Palladium is a silvery-white metal that is rare in comparison to most precious metals. Palladium is used in jewelry, watch making, and dentistry. It also has value in the consumer electronics industry. Palladium is largely used as a catalytic converter in automobile engines.
Though Palladium has never been hot, the demand for it has been steadily rising over the years thanks to industrial use. There’s a particular point that investors should know about palladium: while the demand rises, the supply of this rare metal is dwindling. The same can actually be said of more common silver, which is becoming difficult to mine.
A Stable Trend or Another Glittery Fad?
It’s too early to say whether these precious metal investments are the smartest choices at the moment. It’s possible that post-Brexit paranoia is driving investors into precious metal markets without much thought. Precious metal markets also have a tendency to be volatile.
Experts largely agree that precious metal is a tactical investment, not a stable, long-term venture. Therefore, investors who want to curb financial loss post-Brexit might want to consider hedging their futures with precious metal. Gold and silver, in this regard, are the safest choices. The shine on palladium and platinum markets can easily wear off as the markets stabilize and Brexit becomes old news. But gold and silver have always been secure investments to protect wealth during all kinds of economic downturns.