Industry and Investment


Industry and Investment

Post by johntrade » Tue Sep 14, 2010 7:45 pm

There are different reasons why people invest in precious and/or base metals. What we have seen over the last year in the gold and silver markets is a flight to possible safety from the economic turmoil and the mass amount of job losses. This is not true for every precious and/or base metal, however. There is still supply and demand, and other specific factors effecting price movement.

Take a look at platinum, for example. Prices have come down from their $2,200 high back in May ‘08 to a low of $755 in October ‘08. But wasn’t this the worst of the worst in the US since the Great Depression? Why didn’t this precious metal flourish in troubled times? The answer lies directly within the US auto industry. When banks were failing and credit markets were tightening, it became harder and harder for consumers with good standing credit to get an auto loan. Without these loans for the consumers, it became increasingly difficult for them to purchase automobiles. The likes of Ford, GM, and even foreign makers like Toyota saw their stock prices start to plummet as cars started piling up on the lots of the dealers. Why would this effect the price of platinum? Well, 50% of all platinum use is in catalytic converters that control vehicle exhaust emissions including hydro-carbons, carbon monoxide, oxides of nitrogen, and particulates. When you have a problem selling cars, the demand for platinum starts to decrease – as does the price of this precious metal.

An example of a base metal falling off of its high would be copper. Copper had been trading in a basic range of 50 cents to $1.50 for 33 years from 1971 to 2004. We then saw a massive breakout with prices screaming all the way to their highs above $4.00 in 2008. The major factor here was demand outweighing supply. When stockpiles started growing in inventory – along with the economic turmoil – prices tumbled from that all-time high to as low as $1.25. Investors started withdrawing their assets as this copper bubble burst was on.

Gold, on the other hand, is a different story. Gold was the only metal that had a positive 2008. Investors started flocking to this precious metal early and often after seeing a $700 billion bailout plan fail in the House; Gross Domestic Product decreasing; the collapse of three huge banks; and the unemployment rate rising to 7.6% – it’s highest since 1992. When you have investors getting nervous and losing faith in government, they retreat to the precious metal. Gold has always been a powerful asset. The earliest history of gold is its association with the gods, with immortality, and with wealth itself. It is commonly known to many cultures throughout the world.
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Re: Industry and Investment

Post by nelsonhimes » Wed Jan 16, 2013 10:20 pm

Great sharing. Thanks for the technical perspective and the data points. If gold and silver fall more, I'm buying more.
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Jhon Kumar
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Re: Industry and Investment

Post by Jhon Kumar » Thu Mar 07, 2013 2:02 am

Gold nudged lower on Thursday, as data showing signs of improvement in the U.S. job market bolstered hopes for growth and weighed on safe-haven demand, while investors await policy meetings of major central banks.


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