Precious metals (gold, silver, platinum and palladium) are used to make things, like other commodities, but they are also stores of value. During crises, the prices of precious metals rise.
In the chart below, you can see the index for the average of precious metals prices, daily since 2000. Note how the index falls during recessions, and rises during recoveries (the 2001 recession, the 2008 GFC, the slowdown in 2016 before the Trump tax cut sugar-hit sparked a recovery, ended by the covid crash.)
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However, shorter term, you can clearly see how other factors than demand have impacted prices. The covid plunge (early 2020) is obvious, the rebound in response to massive fiscal and monetary stimulus is clear, up until H1 2021. Then the index falls as interest rates are raised, followed by a spike in response to Russia's invasion of Ukraine. Notice how over the last couple of months, the index has been rising, as concerns about the safety of the global banking system grow. Other commodity prices are declining on average, as the world economy slows, yet precious metals, which in the longer run tend to follow the broader economic cycle, are rising.
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| Click on chart to see clearer image. |
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