Why Commodities Like Silver, Oil And Gold Are Soaring Amid Inflation (2024)

FAQs

Why Commodities Like Silver, Oil And Gold Are Soaring Amid Inflation? ›

In times of rising prices, having exposure to tangible assets like silver, oil and gold often retain their value better than paper assets.

Silver, like gold, is often seen as a hedge against inflation, and its prices also tend to rise when inflation increases. However, silver's behaviour can be a little more complex because it serves as both a precious metal and an industrial commodity.

Few assets benefit from rising inflation, particularly unexpected inflation, but commodities usually do. As the demand for goods and services increases, the price of goods and services rises as does the price of the commodities used to produce those goods and services.

Today, the demand for gold, the amount of gold in the central bank reserves, the value of the U.S. dollar, and the desire to hold gold as a hedge against inflation and currency devaluation all help drive the price of the precious metal.

At the same time, high interest rates that are used to try to tame inflation can temper the price of gold, as high interest rates give investors an attractive option for essentially risk-free returns, like by buying Treasuries or even keeping money in a high-yield savings account.

Gold can protect your portfolio from inflation

But, even if inflation cools, it's typically a good idea to consider investing in gold as a hedge against growing prices. After all, inflation doesn't usually move in a straight line. Instead, it follows cycles of upward and downward movement.

They can help hedge against inflation

In today's inflationary climate, many investors benefit from the protection gold can provide. During inflationary periods, gold often maintains its value or even increases in price (as recent record gold prices demonstrate).

Gold may be the best hedge against inflation and geopolitical risks. Gold emerged as the best commodity to serve as a potential hedge against inflation and geo-political risks.

Prices of different commodities can vary, though all tend to be affected by factors such as production levels (supply) and consumer and business demand. Economic factors also tend to come into play. For instance, during global economic recessions, energy demand tends to subside, often driving prices lower.

More jobs and higher wages increase household incomes and lead to a rise in consumer spending, further increasing aggregate demand and the scope for firms to increase the prices of their goods and services. When this happens across a large number of businesses and sectors, this leads to an increase in inflation.

Why not to invest in gold? ›

However, gold is typically a poor investment option when the economy is strong. It will often lose money during these periods as investors sell gold to put their money in the stock market and other growth assets. In the long run, gold has a significantly lower average annual return than stocks.

All signs point to gold remaining a good investment in 2024. This means it's a good time to both buy and sell gold. But as to what this means to you individually, it's always best to seek professional financial advice before taking action.

The gold price has surged due to the prospect of lower US interest rates, with the US Federal Reserve widely expected to cut rates next week. Central banks have also been buying up gold, especially in countries like Russia and China, which has helped inflate the price.

The price of silver is notoriously volatile compared to that of gold because of the smaller market, lower market liquidity and demand fluctuations between industrial and store of value uses.

Which countries are buying the most gold for their reserves? Russia and China together account for more than 80% of the net central-bank gold demand reported to the International Monetary Fund since 2004.

Which month is best to buy gold? If you're eyeing the calendar, January, August, September, and December have historically been good months for buying gold. Prices tend to go up during these times, so you might catch a good deal.

One of the questions that arises is what would happen to the prices of precious metals like gold and silver in the event of hyperinflation. Like the prices of most goods during a hyperinflationary period, you could expect the prices of gold and silver to rise during hyperinflation along with everything else.

Gold has been used as a form of money for centuries and its value does not depreciate over time. The value of gold tends to increase over time due to its limited supply. There is a finite amount of gold reserves in the world, so as the demand increases, the price of gold will also rise.

The short answer is yes, historically, the gold standard was associated with lower average inflation than modern fiat systems. The average inflation rate under a metallic standard was 0%, while under a modern free-float system the average inflation rate is 2%.

The primary reason that silver is sold at a significant discount to gold is supply and demand, with more silver being mined annually.