If you’re someone who owns or invests in precious metals like gold and silver, you’ve probably learned to become a patient person. On the one hand, investing in precious metals very often requires a long-term mindset that just isn’t present in certain forms of stock investing such as day trading.
Investing in gold and silver isn’t for people who want to get rich quick, it’s for people who understand the long-term stability that gold and silver can bring to an investment portfolio and who are looking for that type of stability in their investments.
On the other hand, that patience can sometimes be born from frustration. Even if your investing time horizon runs years into the future, you still want your gold and silver investments to make money… right now!
You’re probably looking at all the headwinds facing the economy, all the potential for recession, and the massive debt bubble that is hanging over everything, wondering when the whole house of cards will come crashing down. When it does, gold and silver stand to benefit greatly, and their prices could increase significantly. But in the meantime it can be hard to remain patient.
Yes, you may know that the potential for gold and silver to gain significantly in value in the long term is there, but waiting for that to happen can be excruciating. And that’s why price moves like those that took place earlier this week can be so infuriating. After all, if the long-term outlook for gold is so strong, why is it losing value, and sometimes $30-40 in a single day?
Here’s what to look for in the gold and silver prices in the short term and the long term. And here’s why if you haven’t already bought gold and silver, the short term could be the best chance to buy precious metals before prices begin to accelerate.
The Short-Term Potential for Gold and Silver
There are two primary drivers that could affect the prices of gold and silver in the near term. China is one of them, and the economy is the other, with both factors intertwining.
The outlook for China and precious metals are two important considerations that are intertwined.
Both gold and silver saw some losses earlier this week due to fears of what is happening in China. COVID lockdowns in China could significantly impact not only economic production in China but also demand from Chinese consumers and Chinese industry.
China is no longer just a source for cheap goods, its consumer base is rapidly becoming a major driver of demand for consumer goods. If lockdowns spread in China this year, demand from Chinese consumers could drop, leading to reduced demand for a whole host of commodities.
In this way gold and silver were part and parcel of a more widespread drop in commodity prices. And as these fears continue to play out, gold and silver could see some more losses as markets try to adjust to the reality of what’s happening on the ground in China.
Precious Metals and Recession
There are also some fears that the Federal Reserve is going to overtighten its monetary policy as it begins to hike interest rates and reduce the size of its balance sheet. Those fears are leading some to believe that it could impact gold and silver negatively, as tighter monetary policy and higher interest rates are, in the minds of some, correlated with lower prices for precious metals.
But given the other headwinds facing the economy, such as high inflation and a looming recession, the link between higher interest rates and lower precious metals prices stands a good chance of being broken. There is one caveat, however, and that is that it is possible for gold and silver to lose some value in the early stages of a recession.
If we look back to the 2008 financial crisis, we see that both gold and silver lost value as panic entered the financial system. That was a point at which people throughout the world were looking to dump assets and come up with cash to cover payments they needed to make. In essence they were asset rich but cash poor, and needed to rectify that.
If something like that happens again, it’s likely to be a short-term phenomenon, possibly lasting a few months before reversing. That’s just what happened in 2008, as gold and silver quickly rebounded and took off. By 2011 gold had nearly tripled in price, while silver had more than quintupled.
The Long-Term Outlook for Gold and Silver
While the short-term outlook for gold and silver could see some losses, that’s a potential buying opportunity for anyone who has been sitting on the sidelines. And if gold and silver fulfill their potential for long-term growth, this could be one of the last opportunities to buy gold and silver while they’re still relatively affordable. Right now there are three primary factors that should help boost gold and silver in the long term.
1.) High Investment Demand
One of the primary drivers behind rising gold and silver prices today is surging investor demand. More people today are demanding gold and silver than almost any other time in the past several decades. And that is pushing gold and silver prices higher.
Many of these people buying gold and silver are new to precious metals, although they understand the benefits of investing in precious metals. They may have seen the performance of gold and silver in the aftermath of the 2008 financial crisis and vowed that they wouldn’t repeat the same mistakes that saw them suffer massive losses back then. And with inflation rising and a recession on the horizon, thousands of people are taking steps right now to protect their wealth with gold and silver.
2.) Supply Difficulties for Mints
On top of growing demand for gold and silver, there have been periodic supply issues that could impact the supply of investment-grade bullion coins. During COVID some mints had to temporarily suspend production at various times due to workplace illnesses.
Today the main threat to supply comes in the form of lack of gold and silver blanks. The US Mint has already had to shut down production of some of its popular silver bullion products due to being unable to source enough silver blanks. And if demand keeps rising, that could be a bottleneck that impacts investors.
Even though there are vast amounts of gold and silver above ground, it’s not all in a form that is coined or conducive to coining. So if mints can’t get their hands on gold and silver coin blanks to produce enough precious metals coins to meet rising demand, that could impact the supply of gold and silver coins available to the market.
3.) Russian Production Sanctioned
The real elephant in the room is what will happen if sanctions on Russian gold and silver production end up being effective. Russia is responsible for about 10% of global gold production and anywhere from 5-10% of world silver production. Cutting that supply off at a time when demand is rising seems sure to result in higher prices.
Is Now the Time to Buy Gold and Silver?
If you’ve been watching what is going on in the world today and wondering how badly things could get and how that might affect you, maybe it’s time for you to start thinking about gold and silver. It’s safe to say that millions of Americans right now are wondering about their financial future. You’re probably among them.
You may be wondering how much higher inflation will rise. Maybe you’re wondering whether you’ll be able to afford food by the end of the year. Or maybe you’re wondering whether the money you’ve been diligently saving and investing for years is even going to be worth anything when you need to use it.
These are tough questions that many households have had to ask themselves for the first time. This is unfamiliar territory for the majority of Americans, as we haven’t seen inflation this high in over 40 years. As a result, many people are struggling to figure out how to cope.
Many thousands of Americans have made the decision to protect their assets with gold and silver. Gold and silver have protected wealth for centuries and have helped numerous people defend themselves against high inflation, economic turmoil, and financial crisis.
Gold and silver have been especially popular for those looking to protect retirement savings, as they can be owned through a gold IRA or silver IRA. Precious metals IRAs are just like any other IRA except that they own physical gold or silver coins and bars. And you can fund a gold IRA or silver IRA by rolling over or transferring assets from an existing 401(k), 403(b), IRA, TSP, or similar retirement account into a precious metals IRA.
If you have assets that you want to protect, and you’re worried about the direction the economy is taking, shouldn’t you take steps to start defending your wealth? Call the experts at Goldco today to learn more about how gold and silver can help safeguard your retirement savings.
Trevor Gerszt is the founder and CEO of Goldco, a precious metals dealer in Los Angeles. For more than 20 years, Trevor has sought out ways to help people build long-term wealth through the security and stability of precious metals and other alternative assets. Goldco is A+ Rated by the Better Business Bureau, a 5-Time INC 500 Winner and has countless 5-Star Reviews for its quality customer service, dependability and strong reputation.
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