Why Gold Prices are Volatile at Present

The prices of some of the most sought after precious metals such as gold, silver and platinum seem to be on a roller coaster ride in recent times with prices fluctuating quite significantly. This volatility is keeping investors guessing whether the time is right to buy into these assets. With no way of knowing whether the current price will be topped in coming weeks, it is impossible to time your investment right.

However, by understanding the reasons for this volatility it is possible to make a calculated guess about what will happen to these prices in near future so that you can profit from investing in gold coins, gold bullion or silver coins.

Economic uncertainty fueling volatility

One of the main reasons for the fluctuating precious metal prices is the continuing uncertainty in several economies around the world. The price of precious metals is affected by all the world economies which is why such uncertainties have an adverse effect on it. In recent times, the subdued growth in the U.S. economy and slow down in the European markets has contributed to an increased demand for precious metals.

More and more people here are looking at metals as safe haven assets and moving out from currency or other risky investments, including equities, and into gold or silver. Since this demand is primarily investment led it is not consistent.

Margin requirements hiked

On the other hand, margin requirements were hiked by several commodity exchanges across the world including the CME. This has dampened the trading activities in precious metals resulting in a drop in prices too. The price drop has prompted many investors to try and lock in profits by selling their precious metals. This contradictory situation has skewed the demand supply balance, and pulled up U.S. dollar value against that of precious metals as well as other global currencies.

As both economic uncertainties and restrictions on trading continue to co-exist in today’s market, there is no doubt that volatility in prices will be the name of the game for a while yet. Investors will need to tread carefully while making investment decisions. Gaining a good understanding of the factors currently driving the prices before investing in gold coins, gold bullion or silver coins is a necessary first step to successful investing right now.