Did Precious Metals Prices Find Bottoms?

London (Dec 26)  Precious metals have a long history as investment assets and stores of value. The first time that a human picked up a gold nugget that may have been floating in a stream somewhere, the reflection of the sun in the shiny metal likely invoked an intense emotion. For thousands of years, people have hoarded gold and silver as assets. The tradition of wearing jewelry made of these metals is a deeply ingrained part of the human condition. Today, fabricated demand or jewelry continues to account for a large percentage of annual precious metals production. While gold and silver both have industrial applications, it is investment demand each year that determines the path of least resistance for their prices. Central banks continue to hold gold as part of their foreign exchange reserves, and they have been net buyers of the yellow metal over past years. Moreover, mining companies all over the world continue to explore for and extract all precious metals including gold, silver, platinum, palladium, and other platinum group metals from the crust of the earth. Some production is primary, meaning companies are in the sole business of mining for and extraction of the metals. Other output comes as a byproduct of other mining for ores around the globe.

Precious metals prices are a lot higher these days than they were at the turn of the century. In 2011, gold reached an all-time nominal high of over $1900 per ounce, and silver reached almost $50 for only the second time in modern history. The prices of both metals fell precipitously until December 2015 when they found their most recent bottoms, and since then, they have been in recovery mode. At the beginning of this month, the prices of both metals were moving to the downside as silver led the bearish price action. Last week, both metals may have found significant bottoms.

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