Daily Precious Metal News

After posting gains on Tuesday, precious metals prices fell on Wednesday amid concerns that China and the United States would look to tighten lending regulations, endangering the struggling economic recovery efforts. While such measures could have a positive effect on gold prices in the long term, the current news offered motivation for some fear-based selling and general repositioning of investment strategy.

The central bank in China singled out several large Chinese banks, requiring them to raise their reserve ratios to cover excessive lending and instructing them not to issue new loans in certain cases. There has been fear in the United States as well that increased banking restrictions would dry up funds that might normally be used to invest in new projects, thereby slowing the recovery even more.

While some precious metal investors initially reacted negatively, the general school of thought is that tightening bank restrictions could benefit precious metal prices. Although gold and silver dipped almost one percent and platinum tumbled nearly two, this appears to be a reaction based in fear. Tightened lending means that governments are still afraid of the state of the worldwide economy and their concern is starting a period of hyperinflation. With the economic crisis not even solved, it is possible that these are attempts to prop up falling currencies, or in China’s case, a potentially failing economy; the situation falls neatly into the conditions that benefit precious metals investment.

While precious metal prices have fallen in response to banking decisions in China and the US, the long-term outlook appears to favor further price increases in gold, silver, platinum and other metals. Investors holding bullion or certified coins are wise to hold or add to their portfolios if they believe these lending concerns will lead to higher prices. 

Daily Updates Archive

Danny Burns

Senior Staff Writer - Precious-Metal.org