Watchers of financial news will know we are in a time of economic uncertainty. At least after the 2008 banking crisis we knew we were in a recession, but with the scales swinging back and forth traders are not sure what to invest in at the minute. The volatile changes in the prices of gold and silver bullion are a reflection of uncertainty.
The global economy is showing signs of recovery, but so too are the cracks in the debt ceiling. Economic data coming from the States last week revealed the US market is not as strong as initially thought. That the Federal Reserve pulled back on their money printing program last month also suggested the economy was heading in the right direction.
As a result of positive data, professional traders began turning their attention to equities and forced precious metal prices down. Just as it looked as though gold and silver bear market was going to sink to extremely attractive prices, the stock market panicked and investment banks started pulling out of equities and protecting their investments with gold.
What is affecting gold and silver prices?
Gold and silver perform well when currencies perform poorly. When it looked as though the global economy was recovering, investors were more confident about investing in riskier commodities other than precious metals. As a consequence gold and silver precious naturally go down.
In the past week however, traders have changed their tune. The US job market is not as strong as first thought which subsequently weakened the US dollar and a slow-down in China is a signal the world economy is not out of danger just yet. In fact, we are in danger of getting sucked back into recession.
Misleading economic figures created positive investor sentiment, but hopes of a lucrative 2014 were soon dashed when it became apparent recovery was not as strong as the data suggested. As a result emerging markets are already struggling.
Turkey has been hit the hardest. The Lira has plummeted and foreign investors are pulling out of the country – although that in part is due to the biggest political corruption scandal in the country´s history. The Argentinean economy has been in a mess since 2001 and inflation is up more than 25% from this time last year.
Gold safe havens
Lack of confidence in the stock market has returned investor sentiment to precious metals. Gold and silver are considered safe havens as they can be used as legal tender thus always go up in price when the economy is performing poorly.
Gold and silver may be making a mini revival now, but many analysts believe this is a false start to the bull market. The US Federal Reserve is expected to cut their stimulus program by another $10m today and the indicators suggest the equities market will recover and push gold prices down again – for now at least.
We know the economy will not hold for long, but the pillars n which the bank are propping up the debt ceiling with are expected to hold firm for the time being. That gives you plenty of time to invest in gold and silver whilst prices are low so visit coininvest.com today and invest in your financial future.