Silver and gold have been behaving rather well on the market. To decide on what the best investment asset will be for the next 6 months, you need to look at the things that have happened in the last 18 months or so.
Central banks buying sprees
Central banks continued to buy gold in 2021 when most people would have looked at selling. These banks have been net buyers of gold for over a decade and despite everything that has been happening, they showed no signs of letting up.
Institutional banks buy more gold
Central banks aren’t the only financial institutions that have bought gold. According to the World Gold Council, about 40% of the current institutional investors have declared their plans to increase their allocations. Investment in gold is more than a long-term investment it can also be a strategic short-term investment for institutions.
Some countries are taking advantage of the weak gold price
China has been taking advantage of gold prices when they are weak, but they are taking advantage of this fact. China has imported more gold than it has since 2019. The wholesale demand for this precious metal has risen due to an increase in the consumption of gold. China’s average daily trading volume of the primary physical gold contract has once again risen to highs last seen in 2021.
The financial system has been precarious
There seems to be less inhibition when it comes to spending, borrowing, and speculation. This has increased the risk in the gold market and financial market as a whole and any type of fallout will only serve to reinforce the status of gold as a safe haven. This means gold dealers are likely to see growth in their business.
Investors have been focused on fundamentals and not short-term factors that only push prices around by studying the market thoroughly.
Most investors have learned to curb their spending sprees and not to react to the ups and downs or the economics. They buy gold because of other factors like debt loads and asset bubbles that can prevent the federal reserve from normalizing monetary policies. The fundamental factors are still very much at play. These are skyrocketing debts, uncontrollable devaluations of currencies, and deficit spending. These only add to the reasons why people should own more gold. It also means we are still on our way to some kind of major economic implosion. No matter what happens in the world and in the markets, gold will still have more purchasing power.
There were mounting expectations for gold to rise to $3,000 an ounce because of all that has been happening in the financial world however regardless of all crises that we have gone through in the last 5 years, it hasn’t quite gotten to that point. The rising inflation should have been the tip of the iceberg but it hasn’t had that much of a powerful force. The market might take some more time to get to the point where everything comes tumbling down and gold finally soars.
Investors have to take into account that governments will have to respond to various events. With the current monetary policies and systems, the response can be inflationary. This reality will make the yellow metal very valuable.