Precious Metals Fight Hard Against Inflation

By: Jennifer Kary

Precious metals like gold, silver, and palladium are fighting back hard against the global trend of dropping metal prices. Last month, MetalMiner reported that the global precious metals index fell 3.77% between June and July. On July 20th, however, gold bullion prices began to rise steadily. Shortly after that, silver bullion prices also started an upward trend.
Last month, the Fed’s interest rate hikes managed to slightly impact rising inflation, though inflation continues to pose significant challenges. This week, the Fed hiked those rates an additional 0.75. Though it’s a little early to know how investors will react, there are several compelling predictions.
For instance, some experts feel investors might start to view gold, silver, and the like as “insurance.” Others predict they’ll treat them as an investment opportunity – a chance to turn currency into something which will gain value down the line.
Precious Metals

Precious Metals: GDP Numbers Not Favorable

After the release of some less-than-savory GDP numbers documenting Q2, precious metal prices rose slightly. As one recent article notes, part of this upward trend came as a result of the Fed’s interest rate hikes. In times of hardship such as recessions, investors often turn to precious metals to get rid of their inflating currency. In their view, precious metals have the opportunity to gain more value in the long run. So, technically speaking, precious metals can serve as a type of “oasis” where investors can escape inflating costs.
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It’s Getting Harder to Predict a Long-Term Trend for Precious Metals

Despite this brief bullish trend, precious metals prices are still dropping along with most other metals. The real question is whether or not precious metals can withstand such intense inflation. Fortunately, many in the investing world are staying hopeful. As previously mentioned, recessions have historically proven invaluable to precious metal investors.

Still, even with this optimism, the upwards trend could prove to be little more than a temporary reaction to yet another Fed interest rate hike. After all, precious metals as a whole have remained in a downtrend since April. Looking at July’s charts, prices seem unable to decide whether they want to take a bullish or bearish path.
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Will Silver Pull Ahead of Gold?

Traditionally, gold has been the pick of the litter in the precious metals market, but silver has been catching up. Of course, silver markets are historically much more volatile than gold. Still, there’s currently a higher global demand for silver due to its growing range of uses. For instance, the precious metal has applications for everything from water filtration systems and solar panels to x-ray films and medical tools. This gives silver an edge over gold in terms of demand.
That said, there’s no evidence that silver will indeed outrun gold in price, even with July’s precious metals bull trend. On Wednesday, the gold-to-silver ratio hit its highest point since 1990. True to color, the US was also facing recession that year.

Gold Bullions
Gold Bullions, Adobe Stock

Ultimately, only time will tell if precious metals will prove to be the safe haven investors are looking for. Of course, there needs to be a storm before we can judge the quality of the shelter. Until a recession is confirmed, all we can do is speculate and hope.
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