Gold and silver, two of the most revered precious metals, have recently witnessed record price surges, reflecting their enduring significance in global markets. While gold is a symbol of wealth and stability, silver balances its role as both an industrial necessity and a reliable investment.
Both metals are used by central banks as hedges against inflation and economic instability, securing financial systems worldwide. Their dual industrial and monetary appeal underscores their importance in maintaining global economic resilience and stability.
Gold Price
Gold prices hit a lifetime high at ₹80,400 on 4th November 2024. Currently, at 12:05 p.m. the yellow metal is trading at USD 2,688 per ounce or Rs. 80,072 in the international markets.
Silver Price
Silver prices hit a lifetime high at ₹101,323 on 22nd October 2024. Currently, at 12:05 p.m. the yellow metal is trading at USD 31 per ounce or Rs. 92,345 in the international markets.
Reasons for the Rise in Metal Prices
Failing Chinese Economy
China’s economic slowdown has prompted the government to hoard precious metals like gold and silver. This move not only serves as a store of value during uncertain times but also as a safeguard in the event of geopolitical tensions, particularly with Taiwan. By accumulating these metals, China aims to strengthen its reserves, ensuring financial stability and protection against external shocks that may arise from potential conflicts or economic disruptions.
Global Uncertainty Regarding the Russia-Ukraine War
The ongoing Russia-Ukraine war has caused significant market disruptions. Russia, a major silver producer, has been stockpiling large quantities of metals, artificially inflating global demand. This strategy is part of Russia’s effort to secure resources needed to fund its military activities, while also creating upward pressure on metal prices. By purchasing metals in bulk, Russia aims to solidify its financial position amid sanctions and war-related economic challenges.
Fear of Recession in Europe
The looming threat of a recession in Europe has prompted many businesses and governments to buy precious metals as a hedge. With rising inflation, energy crises, and unstable growth, metals like gold and silver are seen as a safe haven. These investments help stabilize the economy by maintaining purchasing power, while offering security against the potential devaluation of currencies during a recession, strengthening investor confidence.
Stockpiling to Act as a Hedge
In times of economic uncertainty and global turmoil, governments and corporations stockpile metals as a hedge against various financial risks. Precious metals like gold and silver act as a reliable store of value during inflationary periods or market volatility. With the weakening of traditional assets and currencies, particularly in the wake of geopolitical crises and economic slowdowns, stockpiling metals ensures stability and financial protection for nations and investors, securing future wealth and resources.
Hedge Against Currency Depreciation
As the U.S. dollar strengthens due to the Federal Reserve’s delayed rate cuts, many investors and nations have turned to precious metals as a hedge against currency depreciation. Gold and silver maintain their value during periods of USD strength, preserving purchasing power. As inflationary pressures continue and interest rates remain high, precious metals provide a reliable alternative investment, shielding against the risk of a weakening dollar and offering a haven for diversified portfolios.
Possibility of BRICS Currency Launch
The potential launch of a BRICS-backed currency has led the member countries to stockpile metals such as gold and silver. These metals would serve as a strong backing for the new currency, providing it with intrinsic value and credibility. As countries like Brazil, Russia, India, China, and South Africa prepare for the introduction of a BRICS currency, securing metal reserves is crucial for ensuring economic stability and reducing reliance on the U.S. dollar, boosting confidence in the new currency’s strength and legitimacy.
Conclusion
The surge in gold and silver prices reflects growing global economic uncertainties. Multiple factors drive this trend: China’s economic slowdown, the Russia-Ukraine conflict, European recession fears, and the potential BRICS currency launch.
As governments and investors stockpile precious metals to hedge against currency depreciation and economic instability, the upward pressure on prices is likely to continue, making these metals increasingly attractive as safe-haven investments.
Written By: Dipangshu Kundu
Disclaimer
The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Dailyraven Technologies or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.
