Precious Metals Investment Outlook Strong Again

Precious Metals Investment Outlook Strong Again 5.00/5 (100.00%) 2 votes

In examining the relationship between the precious metals investment outlook and the stock markets, it has been an odd time. Ordinarily, they move in a contrasting relationship. When the stock market rises, the precious metals investment outlook dims or stagnates. When the stock market is in flux or on the decline, the precious metals investment outlook is booming.

In recent days, though, they’ve both been on the rise. In the past week (ending July 19, 2013), the Dow Jones Industrial Average is up nearly 100 points, or close to .6 percent. In the past month, it has risen nearly three percent. That’s strong growth, which should correspond with a decline in precious metals.

While gold is down over the last month about four percent, it has risen more than four percent in the month of July. Some of its strongest growth this month has come in the last week.

Silver, which usually lags behind gold just a bit, has dropped about .6 percent in the month of July. Still, with the markets rising rapidly, one would expect a more negative precious metals investment outlook for silver.

Platinum is on the rapid rise, going up nearly seven percent this month, to precipitate a rise over the last 30 days. Likewise, palladium has risen nearly eight percent in the month of July.

That all begs the question: what is causing tried and true investing rules to ring hollow in recent days?

People Don’t Trust Governments Financially
One reason that the precious metals investment outlook is staying strong is that people don’t have a lot of confidence in governments to maintain the value of their currency. Though the United States credit rating has been upgraded by Moody’s Investors Service from “negative,” to “stable,” there are still plenty of financial issues for the government to face.

Politically, though the sequester is decreasing the size of the budget deficit, it’s also limiting economic growth. Globally, there are plenty of other governments still fighting the risk of rapid inflation and facing the prospect of more and more austerity measures.

Depending on how that plays out, the precious metals investment outlook could get a big boost. In times of inflation or austerity, gold and silver tend to be reliable investments because people try to get away from stocks and currencies that are more influenced by the economy and inflation.

Fed Intervention is Forcing the Markets Up
The other factor that must be considered is that trading volume is not all that high, especially considering the rapid gains that the markets have been making. That’s because many believe that the growth in the markets is somewhat artificial.
They speculate that it is a response to the plan of the Federal Reserve and the announcement by Federal Reserve Chairman Ben Bernanke that quantitative easing would not be withdrawn if it were still needed.

That has inspired increased confidence in the stock markets for now, but it hasn’t done much to change the long-term outlook. The economy is still not growing all that quickly, jobs are still not being added quite fast enough (though that is improving) and there are continued concerns over the long-term plan that will be put in place to control the national debt of the United States and its budget deficits.

As a result, the stock market is up, but volume is not that high and investors are still hanging onto their precious metals such as gold and silver. Factor in the continued industrial usage of platinum and palladium, and all four of the precious metals are on solid footing at the moment.