Investing in Precious Metals and Short Term Prices

Investing in Precious Metals and Short Term Prices 5.00/5 (100.00%) 4 votes

Investing in precious metals is like any other investment in many regards. The price of metals can go up and down, sometimes unexpectedly. The market tends to balance out, but there are sometimes disconcerting plunges in the value of any commodity, precious metals included. Some investors might be feeling a bit worried about investment in precious metals right now due to recent downturns in price, but this isn’t necessarily anything to worry about at all.

It’s Short Term
One of the mistakes that people make when they start investing in precious metals really has nothing to do with their investment strategy. It has to do with their news gathering strategy. What they’ll do is start watching the metals prices as if they were watching a roulette wheel. Every downturn makes them seat; every upturn makes them cheer. This is not the way to go about investing in precious metals.

The recent downturns in price are short-term downturns. To ignore the fact that these metals have climbed in value steeply over the years and to focus on the last couple of months is to be dangerously short sighted. Some people who view the markets in this way end up making very poor investment decisions based on fear and impulsivity.

You’re Not Disempowered
One of the hardest things about making one’s first investments is finding out how one goes about predicting the movements of the market. Remember that there is some randomness involved in any market, but there are some reasonable ways that people can project the performance of any commodity, at least in the near future.

Where investing in precious metals is concerned, there are some outside forces to consider. The first and most important is the rate of production for any given precious metal. If platinum production tanks during a given year, for example, the value of whatever platinum you own is likely to increase because of the shorter supply. If the production of platinum booms during a year, the price may go down.

Governments can also play a role in metals prices, but not in the direct way that they usually affect markets. Governments are most notable for being able to have significant effects, through policies, on the value of currency. These policies sometimes result in inflation and sometimes result in deflation. Governments can affect the price of metals by selling or buying metal. They do this because they need an asset that’s not directly tied to their currency to shore up their economies. Governments, of course, have the money to buy and sell enormous amounts of metal at any given time, which can affect prices.

Even in these cases, however, the effects are likely to be short term. There is only so much metal that can be mined, so a flood of platinum, palladium or another precious metal on the market is highly unlikely. Governments are unlikely to sabotage the value of precious metals as they, just like investors, have an interest in it retaining its value. In fact, in the 1800s, the US government managed the effects of the discovery of a massive lode of silver in Comstock by issuing the Morgan Silver Dollar.

Keep Calm and Have a Plan for Investing in Precious Metals
The best way to keep yourself from falling prey to investment related stress is to invest in precious metals with a plan. Don’t think of it as a short-term investment and, because of that, you can dispense with the second-by-second metals prices ticker. Over the longer term, you’re likely to see why people do invest in precious metals and how it can preserve the value of wealth over the long term.