Investments in precious metals: what assets are worth paying attention to
After the last tense year, many analysts switched their attention to commodity markets. The reason for the change of priorities was fears related to inflation processes. And even now the echoes of 2020 are still quite noticeable, especially on the securities market and a number of other assets. That is why many people prefer to invest in precious metals, believing it to be a safe investment. Whether this is good or bad, Vitaly Gromadin, analyst of BCS World Investment Company, argues.
The main commodity market is China. After the pandemic it has started to restore processes by importing large amounts of resources. The country is actively filling its storage facilities to eliminate the risk of last year’s situation, when difficulties with supply led to shortages. Precious metals are also among the priority purchases for the Chinese market. The fact is that the government has adopted a zero-emissions strategy, and wants to implement it before the deadline. Therefore, large resources are directed to the construction and development of alternative energy facilities. According to the analyst, to increase the number of wind and solar energy complexes it is necessary to increase the supply of copper and silver. The latter metal is used to manufacture photovoltaic panels. In addition to the fact that copper is a component in the construction of power lines, it is used for the production of electric cars, which in the future should replace traditional means with an internal combustion engine.
It should be noted that trends in the silver market are directly linked to the dynamics of gold. In addition, it is influenced by the yield of the U.S. government bonds for a period of 10 years.
In turn, copper is dependent on the situation in China, as that country accounts for more than 50% of metal consumption. The development of 5G technologies and their infrastructure, as well as the automation of production processes and production of electronics increases demand for it.
As for investing, Gromadin advises to take a closer look at industrial metals. For example, 40% of total platinum consumption comes from the automotive industry. After the slowdown in 2020, this industry is now actively recovering and requires more raw materials. In addition to this metal, aluminum is in demand, which is used in many areas.
The optimal solution for the investor will be to buy shares of companies that produce these resources.
Do not forget about gold, which for a long time keeps the status of a reliable asset. According to the forecast, the price of precious metal by the end of the year will remain at $2200-2400 per troy ounce. After peaks in 2020, the market for gold will gradually stabilize, and even at high demand fluctuations of cost will not be so abrupt as earlier.