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Supply and Demand of Precious Metals

Savvy investors who actively follow the spot prices of Precious Metals will know that Gold, Silver, Platinum and Palladium are all experiencing some pullbacks from the extreme highs we saw in January. While there is no way to reliably foretell the future, we still believe we are in an overall bullish trend, as there has been recent growth in all Precious Metal markets, and we expect continued demand for all the commonly traded Precious Metals. We invite you to examine the information at hand and see for yourself why we are hopeful about the Precious Metals markets.

Current Silver Prices and What They Mean

Silver supply was temporarily affected recently by the complete shutdown of the world’s second-largest Silver mine, as well as by a marked slowdown in the scrap Silver market. This slowdown is happening even as the demand for Silver increases. The cost of Gold is driving the increasing use of Silver in the fine jewelry market and the growing demand for clean energy means exponential demand for Silver in the solar industry. Silver is an essential part of converting the sun’s rays into usable energy and each solar panel requires about 1/3 oz of Silver in its manufacture. These are just two examples of growing Silver demand. For investors watching the Silver spot price, this means we could see real competition in acquiring the quantities of Silver required for these and other industries, which could result in higher Silver prices per ounce. In-the-know investors will want to research the Silver supply chain thoroughly when planning short-term acquisitions, as demand may far outstrip supply.

Current Gold Prices and What They Mean

As with all commodities, the greatest influencing factor on the Gold market is supply and demand. Gold is particularly interesting, though, because the Gold market depends less on newly mined Gold than other Precious Metal markets. The Gold “above ground” is still fairly liquid. While about two-thirds of the Gold produced each year goes into jewelry, jewelry in many countries represents liquid wealth. This is something we explore at APMEX, encouraging our clients to see a fine heavy Gold money clip, for example, as a different form of Gold investment. Gold used for personal adornment often makes its way back into circulation after a few years or perhaps a few generations. A small amount of Gold each year goes into medical and industrial applications while the rest goes into investments and exchange-traded Gold funds. A bit of cursory research on the supply side versus the demand side of the Gold market will show you the ever-wavering balance that makes Gold a good long-term investment with real potential for growth over time.

Current Platinum Prices and What They Mean

Platinum is unique in its scarcity. Platinum is the rarest of the commonly traded Precious Metals and is in high demand for both personal adornment and industrial purposes. Almost half the annual Platinum production goes directly to the automotive industry to help control vehicle emissions; Platinum is likely the hydrogen ignition catalyst in your car’s catalytic converter. Platinum is also experiencing unprecedented demand in the fine jewelry industry. High-end jewelry demand accounts for about one third of the Platinum mined each year. Resistant to tarnish, Platinum is more durable than Gold or Silver and is considered the height of luxury. Aside from Precious Metal investment products, less well-known applications for Platinum include medical machinery electrodes and use in turbine engines.

Current Palladium Prices and What They Mean

While Gold is recognized the world over as carrying intrinsic value, Palladium has a fairly specific market. Its uses in the automotive industry are increasingly important as the global economy turns toward “green” practices and cutting auto emissions is a key part of that. You may feel that Palladium doesn’t offer the same resale opportunity of the other Precious Metals, but Palladium has something going for it of which beginning investors may not yet be aware: Due to upsets in Palladium prices and the global Palladium supply within the past few years, and considering that demand is outstripping supply, some Precious Metals experts think the value of Palladium can only rise. While purchasing Palladium represents a speculation, it is a well-founded speculation.

Supply and demand drive every market force. While there is no way to predict exactly what the future holds, we can examine all available information on supply and demand and observe the spot price of Gold, Silver, Platinum and Palladium for signs of significant movement. Smart investors don’t buy and sell blindly, but rather consider all possible factors when making decisions about purchases and resources. Let APMEX’s excellent tools help you understand current supply and demand and make the best choices for your investment dollar.

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