By: Dr. Mike Campbell
Gold and silver have been regarded as precious metals since antiquity. They have both been used for currencies in the past and, indeed, at one time all international trade was conducted against a “gold standard”. They have been used to create artefacts and jewellery and have been used as a measure of wealth for millennia. In more recent times, both metals have found important industrial uses: 11% of the world’s gold production and 52% of silver production are used for industrial purposes.
Gold is priced in US Dollars and as the value of the Greenback declines, the value of gold appreciates to compensate for this. In this way, gold is seen as a hedge against a weaker Dollar and also as a countermeasure for investors against inflation. In turbulent times, gold is regarded as a safe haven since it retains its value. As a consequence of this, gold has been much in demand since the global financial recession struck and this has forced its value up.
The value of gold has hit a record high of $1580.30, before falling back slightly. Since the onset of the global financial crisis, the value of gold has more than doubled – it has risen six-fold over the course of the last decade. Silver, too, has seen substantial investment and its performance has been even stronger. Silver has multiplied in value by five times since the world economic crisis and has enjoyed a twelve-fold rise in price over the past ten years. The metals (and other precious metals) are likely to remain high (or appreciate further) whilst uncertainty prevails in the markets. As nerves calm, the values will undoubtedly fall back somewhat, but with turmoil in the Middle East and concern over oil supply, uncertainty in the world’s third largest economy over the lasting effects of the earthquake and tsunami, major debt problems in the USA, Japan and parts of Europe, doubt and uncertainty are likely to keep gold and silver in high demand for some time yet.