How Trade Wars Affect Precious Metals
The effects of a trade war on precious metals can be difficult to predict, since one has to consider interest rates, the dollar’s strength in relation to foreign currencies, and supply and demand. However, past conflicts give a good indication of what can be expected from future disputes.
Precious Metals Imports May Fall
In the past, trade wars have led to a drop in imports, especially that of raw materials and precious metals. This of course benefits investors as the value of their metals rise, especially those that keep them physically in faults. However, those who hold securities in mining companies might not see much difference.
The Impact Will Vary Across Countries
Some countries will be more adversely affected than others. It is first important to highlight which nations produce precious metals, as during a conflict they could experience a surplus rather than a shortage. When it comes to gold China is a global leader, mining more than 340 tons per year. Other important gold miners include South Africa, the USA and Russia.
The top miners of silver include Australia, Peru, China and Mexico. Platinum, which is one of the most important metals for automobiles, is primarily mined in the United States, South Africa, Russia and Canada. In a trade dispute, the Russians and Chinese will probably be the United States most fearsome adversaries. This means the value of precious metals, especially platinum and gold can spike quickly.
Trade Wars Create Fear Which Helps Precious Metals
President Trump recently announced the implementation of tariffs on both aluminum and steel. Although neither is considered a precious metal, the announcement influenced the market price of silver and gold since many consider these metals safe havens. In fact, anything which produces market uncertainty is good for precious metals investors.
Trade Wars Can Slow Growth While Creating Inflation
In the past trade conflicts have led to increased inflation, while simultaneously slowing market growth. There is a strong possibility that the Federal Reserve might actually boost interest rates numerous times as this conflict commences. However, should the interest rate pace slow down, this would be a good thing for gold. Furthermore, continued market unrest will give precious metals another boost.
Recommendations For Precious Metals Holders
The current trade conflict shows no sign of slowing down. The USA isn’t backing down, and neither are the Chinese, and should Trump win a second term, this conflict could easily rage on for another four years. Therefore, this might be a good time for investors to stock up on precious metals, especially silver, which is incredibly undervalued. Those who own junkyards or old automobiles might also want to start collecting worn catalytic converters, as they will be high in demand for recycling. There are many refiners/smelters that would be happy to buy any metal scrap you have, whether it be for automobiles, jewelry or other sources. While many will be hurt by this trade war, others will profit handsomely.