As the decade opened, precious metals (namely gold) were among
the most popular commodities for long-term investors. Many had
grown comfortable with the commodities as safe haven assets that
would help to protect their portfolios from inflation and any
unforeseen market dips
. But Ben Bernanke may have let the air out of the precious metals
world when he announced that the Fed would begin tapering its bond
purchasing late this year or in early 2014.
Precious Metals at a Pivotal Point
These hard assets are in quite a bind now that the end is in sight
for quantitative easing. For a while, the consistent money printing
from the Fed had propelled these assets higher, as many felt that
dollar was becoming diluted
, making assets like gold much more attractive and poised to make a
run. Some were calling for gold to jump as high as $5,000/ounce,
only to watch the precious metal suffer a sharp correction.
Now that Bernanke has announced the end of QE is near, precious
metals have pressure from both sides. On one hand, the ending of QE
means that there will be less money printing, taking away one of
the key reasons that precious metals made their run higher in the
first place. On the other hand, these commodities have also been
weak because of a strengthening economy, which has prompted many
investors to increase their risk appetite.
One of the chief reasons that the Fed will be tapering is because
they feel that the economy is on stable enough ground to handle it.
If the economy continues to improve, precious metals will probably
feel the pressure.
There's a Catch
An improving economy can be bad for gold (undoubtedly the most
), but there is a silver lining, no pun intended. Silver, platinum,
and palladium are often considered quasi-precious metals and
quasi-industrial metals, as the three have many more practical uses
than gold. If the economy does continue to improve, there is a fair
amount of room for these metals to make a run higher based on their
industrial demand, but that would require shaking off their
precious metals stigma.
To say the least, the near-term future for precious metals is quite
hazy. Though many are in agreement that the metals will find their
way at some point down the road, it seems that no one can agree on
when exactly that will be. For now, all investors can do is wait
patiently and keep a watchful eye on the market.
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Editor's note: This article by Jared Cummans was originally