Determining the Precious Metals Outlook

Determining the Precious Metals Outlook 5.00/5 (100.00%) 3 votes

Before you can determine the precious metals outlook for the future, you have to look at two things. First, you need to look at the economy, and then you need to look at supply and demand. The two actually work together to drive prices up.

The Economy’s Impact on Precious Metals
When the economy is good, people play the stock market and invest in things that are backed by cash. However, when the economy goes downhill, investors are more likely to put their money in precious metals.

Precious metals make good investments during bad economic times because they are practically immune to inflation and deflation. That’s because precious metals have an intrinsic value and their demand outweighs their supply.

Supply, Demand and Precious Metals
Capitalist societies work to strike a balance between supply and demand so currencies can hold their value. However, when it comes to precious metals, it is highly unlikely that supply will ever meet demand since there are only so many precious metals available in the world.

The gap between supply and demand grows much bigger during times of economic crisis because more people invest in precious metals. Thus, an economic crisis improves the precious metals outlook.

With that in mind, let’s take a look at the current state of economic affairs in the United States.

The Current State of Affairs for the Precious Metals Outlook

According to Bloomberg, 2013 hasn’t been kind to the United States. Taxes have gone up. When the tax increases hit in January, incomes dropped more than they had in 20 years. That’s not the only bad news. Disposable income fell 4%. That means people have less money to spend on the things they want and need.

Then, on March 1st, $85 billion in federal spending cuts took effect. The cuts might lead to massive layoffs and delayed paychecks, along with other problems.

Basically, the economy is not good in the United States. While that’s bad news for most people, it’s really good news for those who invest in precious metals.

Now let’s look at precious metal supplies.
Precious Metal Supplies
As you know, the poor economy will cause more people to invest in precious metals. That will cause the supplies to dwindle.

That’s not the only thing that will change the relationship between the supply and the demand. The auto industry is enjoying growth while the economy is in shambles. According to the San Francisco Chronicle, sales went up 4% in February. Growth has slowed down now, but it’s not expected to stop, even though the United States is in the middle of an economic crisis.

This is great news for precious metal investors, since palladium and platinum are both used to make catalytic converters. In both cases, demand is expected to outweigh the supply by large margins. That will likely drive the prices up for both precious metals.

All signs are pointing toward a positive precious metals outlook. With a poor economy and a lack of supply, precious metals will likely keep going up, making them incredibly sound investments.