Why Should You Invest in Precious Metals

A good way to mitigate risk in an economic environment where investors are witnessing a raging pandemic, a declining U.S dollar, and rising inflation is to hedge a portfolio. Gold, silver, platinum, and palladium can be good hedging investments against adverse market conditions. Like insurance, this strategy can help counteract a loss in value. Since the start of 2020 and driven by the pandemic, the price of gold has climbed 28%. Although it is arduous to predict how much higher it could climb, Bank of America and VTB capital analysts project it will hit US$ 3,000/oz in 2022 from US$ 1,950.85/oz in September 2020.
The government-backed stimulus added dollar liquidity in the market and boosted the gold prices to an all-time high. As the dollar weakens against other currencies, investors start flocking to gold to alleviate currency debasement and use it as a store of value since it’s a reliable safe-haven.

Bank of America predicts that silver will outpace gold in 2021. The new administration’s strong commitment to green energy will likely increase silver industrial demand in solar panels. Green hydrogen, which uses silver and necessitates tremendous amounts of electricity to produce, will create the largest-scale demand for it. Given the fact that about half of silver’s demand hinges on industrial uses, the outlook is bullish.

Many analysts are predicting that a return to a normal global economy will cause palladium and platinum to attract new investors due to rising industrial demand. Palladium is used to meet tightening emission standards in gasoline-powered engines; before the pandemic, its price skyrocketed to $2,700 and forecasts predict it will resume its sharp climb. Furthermore, the government’s dedication to the environmental crisis supposes that the new government will rejoin the Paris Climate Accord which will probably cause an uptick in demand for palladium and platinum which is used in diesel-powered vehicles to reduce harmful exhaust emissions.

Platinum holds a small advantage over palladium because there is a physical demand for it in the jewelry industry. Although the pandemic aftermath will likely result in a primary market surplus for platinum, according to industry analysts, jewelry demand coupled with investment demand will balance the market.