The value of bullion bars is determined by its purity and mass. It is then measured against the precious metal trading price on the commodities market. Gold and silver are popular choices although it is possible to buy other types of precious metal such as copper, nickel and aluminium or even platinum.
However, it is more likely and possibly more predictable to make gains in the gold and silver market.
One of the reasons for this is that the end of supplies for gold and silver are in plain site, estimated to be around 2033 for gold and 2037 for silver. Gold is recycled more regularly, however it is not yet common practice to recycle silver. Sometimes up to 95% of gold is recycled, but this happens far less for silver.
Both precious metals have increased in value significantly over the last 40 years and are expected to continue this trend until limits are reached, but we cannot predict the value of a gold or silver bullion at this point.
Having said that, it is safe to assume the current markets will continue to increase or decrease in value in response to world news. Usually any chatter about recession, military action or unsettled politics can cause an increase in value. The US debt cap could spiral the world economy into another financial crisis worse than anything we have witnessed in the past.
Inflation prompts demand for bullion
The reason for the volatile behaviour in the precious metals market is because investors are sometimes protecting the value of their currency by trading it for gold and silver when there is negative economic data, whilst the reverse is true when economic and political data is positive. When there is risk of inflation it is normal to see demand for precious metal increase.
During the recent economic depression, governments had increased currency note printing capacity to encourage economies to grow, this is to do with world trade. If a country is able to reduce the strength of their currency then it can become economic sense for other nations to trade with them, however the long-term outcome of this is inflation. For example, your house would have cost far less to buy 40 years ago than it would today, effectively your money is worth less. This does not happen with precious metal to this extent and therefore is a relatively safe way to protect the value of your currency during economic turbulence.
Today you can buy a one gram of gold bullion for just over £32 or 1 ounce of silver bullion for less than £20. If you have an unlimited budget then so too is the amount you can spend on precious metal stocks. Gold and silver bullion prices are in general on the low side compared to last year, due to reduce demand in response to recent positive economic news and a lot of traders are taking advantage of these prices by extending their buy positions.