Gold and silver prices have been surging significantly higher as investors seek safe-haven investments to guard against further monetary easing by global central banks following the Brexit vote. With political and economic concerns firmly entrenched, precious metals like gold and silver continue to represent excellent long-term investing options for investors looking to diversify their portfolio.
Gold and Silver Prices Soar
Gold and silver have been some of the top-performing assets so far in 2016. Gold prices are up roughly 26% since January 1 at a two-year high of approximately $1,355 per ounce.
Silver prices have soared even higher, up 44% over the same period at nearly $20.00 per ounce. Silver tends to attract more speculative bets than other precious metals like gold and platinum because of its lower cost.
But it didn’t start out that way. In December, gold was trading at a five-year low while silver was trading at a five-and-a-half-year low. Precious metal prices were dragged down in large part by fears of rising interest rates in the U.S., the world’s biggest economy.
The U.S Federal Reserve raised its key lending rate in December for the first time in nearly a decade, certain the U.S. economy was on the rebound. As a result, investors shunned precious metals.
The start of 2016 saw gold and silver prices mount a remarkable turnaround. Silver and gold prices surged in the early part of the year as economic data from the U.S. showed the country was not as strong economically as initially thought. Furthermore, economic concerns out of China, Japan, and the eurozone continued to grow, suggesting a global recession was not out of the equation.
Gold and silver prices received a further boost in late June after the United Kingdom voted to exit the European Union. This buoyed fears that the U.K.’s fragile economy could tip into a recession. To prevent this, it is expected that the Bank of England will introduce further monetary easing strategies, possibly reducing interest rates to zero from the current record low of 0.5%. This could help improve economic conditions in the U.K., but it also reflects weaker growth expectations and devalues other assets.
Physical gold and silver prices may give up short-term ground to profit taking, but the growing fears about the global economy, the impact the Brexit vote will have on the British economy, and tumbling interest rates around the world should support higher precious metal prices in the second half of 2016.
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All of this opens the window to investing opportunities for those who have a strong understanding of various investing strategies, whether that means buying physical gold or silver, mining stocks (which have soared even higher than gold and silver prices), or precious metal exchange-traded funds, trading currencies, or even betting against the S&P 500.
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