Introduction to Factors which can affect the Price of Gold and Silver

Introduction to Factors which can affect the Price of Gold and Silver

Dear Reader

We recently wrote a piece specifically if you have never bought Gold and Silver before. From 2012 80+% of our clients have been new to the Physical Gold and Silver market, so please rest assured you are in good company. When you call us, no question is too silly. Everyone who has bought Gold and Silver did so for the first time at one stage in their lives. We value helping our clients explore their way into this traditional, fascinating market rich with beautiful products for investment and family gifts. 
 
We're happy to say many of our clients return again and again, to save more Gold and Silver. So today we are going to explore how to watch and read the news, to help guide you as to the factors that may affect their price. We're going to give you some words and names that will then act as your very own inside information to help you think "Buy Gold and Silver!", ahead of the crowd.
 
Rather than feeling like a gamble, we would like to enable you to get to a place where owning Gold and Silver feels as straight-forward in your understanding of what makes a profit as owning a house, stocks and shares or an ISA. So, first, to recap, if you have questions regarding your first steps into your Gold and Silver ownership, please read our previous introductory article here. This covers topics such as: 
  1. How Can Buying Physical Gold and Silver Protect My Wealth?
  2. What Forms of Precious Metals Should I Buy?
  3. How Much Will I Get When I Sell My Gold and Silver?
  4. Is There a Legal, Transparent Way to Avoid Some Taxes When Buying and / or Selling Gold and Silver?
Once you've decided you would like to purchase Gold and/or Silver, there are then certain factors that may affect the price and it is great to know a little more about these. We would like to help you to enjoy spotting these signs as you read the papers or look around you.
 
The factors which often affect the price of Gold and Silver generally fall into two categories:
 
1)  The first are factors that are universal to most markets. These include supply and demand, availability and historical price ratios to other products ie: is the price high or low compared to it's historical norm? We use this technique every time we buy tins of beans on special offer! We know what the 'usual' price should be and we snap up a bargain when that price is on offer. The principle is exactly the same with Gold and Silver!
 
2) The second category are issues that may affect the Gold and Silver price more than other markets, so factors that are more unique than general financial principles. These would include often dramatic events, such as currency collapses, regional wars and financial developments of other countries. Some countries are much more significant in relation to Gold and Silver because they themselves hold more. 
 
This is an introduction to those factors and will serve as a reminder of what to take notice in the headlines. You can then do as much or as little research as you enjoy. You may decide to subscribe to our blogs or you may decide, in addition, to read around the subject, depending on your interests and level of free time. We are here to help, and either way, we hope this article will serve to give you some names and words to look out for, to increase your knowledge of exactly what affects the price of Gold and Silver. We cover many of these topics in much greater depth in previous blogs. So visit our blog archive at the end of this article if any one of these headlines peaks your interest.
 
So, firstly, the general factors:
 
We all understand the basic premise that the rarer something is the more valuable it is.  So we like to keep abreast of the figures for the Supply and Demand of both Gold and Silver. With a simple search, these figures are easy to come by. "If there is any certainty in the world, [and there is very little], it is that the demand for gold and silver is at its highest and has been running at a fevered pitch for several years.   From John Keats “Ode On A Grecian Urn,”  “…that is all ye know on earth, and all ye need to know.” (Edge Trader Plus, May 23 2015)  Sometimes it really is that simple. Also note that there are seasonal increases in demand. For example, India has a huge Gold demand and it rises like clockwork every October, due to Diwali: "Asian demand for physical gold has picked up in recent days, thanks partly to low prices lifting demand during India’s Diwali, the festival of lights, which is the country’s biggest gold-buying occasion of the year. Analysts say that nearly 20% of annual sales are generated during the five-days-festivity, and the World Gold Council predicts that India will import 850 to 950 tonnes of gold in 2014, RT.com reports." This annual increase in demand often affects the price. A simple piece of information such as this can help our clients know exactly when to buy.
 
The other connection to make to Supply and Demand is the awareness that Silver is an industrial metal. Only a smaller fraction of it enters the investment market, so the price of silver competes with the needs of industry. Another quick search will show you all the uses of Silver; from Solar Panels, the Health Care industry, to its many conductivity uses in phones and e-gadgets. Now, when you read about a new massive Solar Farm Development in the Middle East or see the large new Solar Farms springing up over rural areas of Britain as you drive to family for the weekend, we encourage you to "Think Silver!"  If it's being used more, the demand is rising, which means at some point its price rise will match that increased demand. 
 
The second general factor that affects price is availability. This is an instinctive understanding in all of us, and in the Gold and Silver market it is no different. So, now imagine you glance over a piece in the weekly papers about Gold miners going on strike in South Africa. Or imagine you read that Russia or China are no longer exporting any of their Gold and Silver? This will naturally affect the price of Gold and Silver, either in the short term and/or the long. 
 
See how your daily browse through the papers can start lighting up straight-forward signs to buy Gold and Silver as an investment?
 
The third general factor is the historical value of an item vs. how much it is today. In short, Silver is on Sale! Historically Silver 'should' be priced at an average of 1/15th of Gold but the price ratio of Gold to Silver as of today is a staggering 74/1. That means Gold is selling at 74 times more than the price of Silver.  This ratio is perhaps one of the more glaring disconnects in the market  The gold silver ratio significantly reinforces the urgency behind loading the boat with silver coins. It takes a level-headedness to look past the James Bondesque allure of owning Gold, to seeing silver having the potential for a much higher return."  
 
Now onto the second category of factors, which you can read about every day all around you, that can affect the price of Gold and Silver. Whereas the first category is a quiet constant background hum, as it were, the second category of factors are usually specific and noisier bangs! This is because they are international issues. Here are just a few:
 
Currency Collapse:  A currency is simply the piece of paper we use every day to represent our money. It isn't really money. It's a promise of that amount and as long as we both agree on the amount of goods my £10 is worth, all is well.  The same is true between countries. As long as both countries agree on what their currencies are worth, all is well. But all is not well in currencies. The biggest current headline as an example of this is: "What will happen to the Euro Zone and Britain if Greece leave the Euro?"
 
Greece are effectively facing a devastating currency collapse as they inevitably leave the Euro and return to a highly devalue Drachma. But what does this have to do with Gold and Silver? When Zimbabwe faced a currency collapse and entered a period of extreme hyper-inflation, every body reverted to buying and selling goods in gold, because it was the only real money on which everyone could agree. Starving people literally dug for tiny nuggets of gold to buy bread and petrol, as their bank notes became worthless as the hours passed. Big companies and investors move their money out of uncertain currencies, or even currencies that might be exposed to an unhealthy currency, and park their investment in Gold and Silver until the storm passes. This affects price. It is often wise to own Physical Gold and Silver before these big hic-cups. So, now watch the Euro Zone headlines making the connection to the advantages of owning your personal supply of Physical Gold and Silver.  
 
Note that a currency collaspe is rarely out-of-the-blue. Preceeding this, there is usually a time of Quantitative Easing, Inflation, Deflation, then Hyper-Inflation. If you would like to explore these buzz-words deeper, these easy-to-watch-for financial developments are explained in greater depth in several of our previous articles here.
 
 
The next factor that you will read about that affects the price and the demand for Gold and Silver is regional wars and political turmoil. This is particularly true if the country in turmoil can affect the international oil and petrol prices. Well, tragically, we are seeing increased turmoil in the Middle East and the oil rich nations. Oil supplies have been threatened with cut-off to Western nations several times. When you see those kinds of headlines, think "Gold and Silver." Banks, Central Governments and investors all regard Gold and Silver as "safe havens" during times of wars and regional threats. 
 
If a war suddenly erupts, and I've never felt that that is more likely frankly, and if oil is cut off, that will raise the price of petrol rapidly. During those times, the £60 it took to fill the tank last month won't fill it this month. But imagine if you had some savings in Gold and Silver coins that had increased in value? Gold and Oil tend to move in tandem, unlike paper money and oil. 
The last factor we are going to introduce today is the one that all of us are bombarded with every day but we don't always realise it. It is the nuggets of information in the news that let us know the financial developments in other countries, especially in relation to Gold and Silver.  China and Russia are the two countries to keep your eye on. Both are now the biggest buyers of Physical Gold and Silver. Both are challenging the Dollar as the World Reserve Currency and America's position as the World's Superpower. If they can undermine the dollar, they can push for a Gold and/or Silver backed new reserve currency and they are both acquiring as much of both these precious metals as they can in the meantime. Both countries are stirring from their time as quieter players and are jostling for a stronger international position. Any news item that you read now, which points to this sign, we encourage you to: "Think Gold and Silver."  Are China building islands into the South China Sea? "Think Gold and Silver." When Russia invaded Crimea? "Think Gold and Silver." When China set up the new Asian Infrastructure Investment Bank, a new international group of countries joining together to form a new international banking system? "Think Gold and Silver!"
 
To explore all of these issues further please browse and enjoy previous articles Here. In the meantime, each day when you now hear the headlines, "Think Gold and Silver." If you're not sure how a development might affect the future demand and price of Physical Gold and Silver, give us a call. We research these factors on a weekly basis to keep you - our customers - informed.  
Of course, we wouldn't be doing our job thoroughly enough if we didn't say that none of this is an exact science and that the price of Gold and Silver can go down as well as up.  But when we take a step back and look at the price of these metals over the last 20 years or so, the general wealth cycle is easier to spot. Through out history, Gold and Silver have been seen as traditional stores of value during uncertain times.  When the road gets bumpy, many put their money into Gold and Silver. We encourage our readers to look at these metals with a long range view, so that if the price dips before it rises you can peacefully go about your business, knowing you can afford to wait. We would like our readers to be aware of what to look for, how to read the news with fresh eyes, relating previously "disconnected" headlines owning your own Gold and Silver. We would also like all our readers to be those people that were in the market before the price rises.
 
Browse our wide ranging stock from small investment to large. See how straight-forward owning your own Gold and Silver can be. If you would like to know more about the many different Gold and Silver products we offer, plus information on home or away from home storage, holding Gold in a pension or even buying home Gun Cabinets, please feel free to email [email protected] browse our website, submit an enquiry and sign up for our weekly newsletter. One of the team will contact you to chat through your options.  We can help you make your own individual choice about your wealth protection, look together at how you can save both VAT and Capital Gains Tax in owning Physical Gold and Silver and which products will work best for you. Accumulating Physical Gold and Silver is quick, straight-forward and rewarding.   
 
We look forward to doing business with you.
 
To enjoy many of our previous articles on these subjects please click here.
 

 

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