Precious metals such as gold, silver, platinum, and palladium have been cherished as investments for centuries. They are viewed as a safe haven during times of economic uncertainty. In 2023, the prices of precious metals have risen significantly. What are the causes of this increase, and what does the future hold for precious metals?

Causes of Price Increases

Several factors have contributed to the rise in precious metal prices in 2023. One major factor is the war in Ukraine and the Middle East. Wars lead to uncertainty in financial markets, causing investors to seek safe havens for their investments.
 
Another factor driving the price increase of precious metals is inflation. In the United States, for example, inflation reached 7.5% in 2022, the highest level in 40 years. Inflation reduces the value of money. Precious metals, particularly gold, are seen as an inflation hedge. This means they are investments in assets that retain their value during inflationary periods.
 
Changes in monetary policies also play a role, such as interest rates and quantitative easing. Lower interest rates can make gold more attractive, as investors seek alternatives for returns.
 
Lastly, gold is traded globally in dollars. When the value of the dollar decreases, it can increase the demand for gold because it becomes more attractive for investors outside the United States. They receive more dollars for their euros, for example.

Future expectation

The future outlook for precious metal price trends in 2024 is positive. The war in Ukraine and the Middle East will likely continue to cause uncertainty in financial markets, sustaining the demand for precious metals.
 
Additionally, inflation is expected to remain high for some time, continuing to support the demand for precious metals as a means of preserving purchasing power.

Advantages of Investing in Precious Metals

There are various advantages and disadvantages to investing in precious metals, which we will briefly outline below.
 

• Scarcity: Precious metals are scarce resources. According to Thomson Reuters GFMS, approximately 200,000 tons of gold have been mined globally since the beginning of humanity. If all that gold were melted into one large cube, it would measure about 22 x 22 x 22 meters.
• Inflation Hedge: Precious metals have inherent value that is not dependent on the economy, making them a good way to protect wealth against inflation.
• Distributed: Precious metals are distributed worldwide.
• Technological Applications: Silver is widely used in industry, such as in solar panels and the medical industry.

Disadvantages of Investing in Precious Metals

Of course, as with any investment, there are also disadvantages to investing in precious metals.
 

• Illiquidity: Precious metals are not as liquid as other investments, such as stocks or bonds. This means it can be more challenging to sell them quickly. However, at The Silver Mountain, you can always choose to sell your precious metals easily, quickly, and at any time through Inkoop Edelmetaal.
• Storage Costs: Precious metals must be stored securely, which can incur additional costs. We offer storage facilities at The Silver Mountain through Edelmetaal Beheer Nederland, with rates between 0.65% and 0.90%. Your precious metals are then stored safely, insured, and allocated. Delivery is also possible without additional costs.
• Risk of Loss: The price of precious metals can fluctuate, just like stocks and bonds. It is therefore important to invest with money you can afford to lose. We also recommend having a long-term vision when investing in precious metals.

Tips for Investing in Precious Metals

If you have decided to invest in precious metals, it is important to conduct thorough research. Investigate the different types of precious metals and the various ways to invest in them. Ensure you choose a reliable party to buy (and possibly store) your precious metals.
 
The Silver Mountain is a trailblazer in the industry, setting itself apart from competitors through several innovative features. We offer a comprehensive Knowledge Center with articles and videos, and we were the first in the Dutch market to introduce First Time Buyers guides that provide detailed explanations on investing in precious metals. Additionally, we pioneered a unique Selection guide tool, making us the first in the Netherlands to offer this valuable resource.

Disclaimer: The Silver Mountain does not provide investment advice, and this article should not be construed as such. Past performance is no guarantee of future results.