Metals on Decline, Shares Continue Growth

January 17, 2018
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Predicting the gains from investments is a difficult process and every investor today should be aware that there’s always a high level of risk in the market. Volatility is a key word that every investor will be familiar with, but recent trends in the stock markets suggest that the only volatility to be found is in the key precious metal investments. Stock markets are on a high, while metals on decline falling at a concerning (although not quite alarming) rate.

It’s Not Just the United States Markets That Are Performing Well

Stock markets around the world have seen increases in value across key stocks, offering some promising future prospects for those who have diversified. Japan’s Nikkei, one of the most important measures in global finance, is currently sitting at levels that haven’t been seen in over 25 years.

European markets, including the STOXX have been performing well, with small gains that have only been offset by falling metal prices. Copper is of particular note, falling 1.8% in the last week, and Nickel is also down by as much as 4%. Although this might be worrying for short term investors, long term investors will take confidence knowing that metal prices dropped at the end of 2017, before recovering at the beginning of the new year. Again, volatility has a role in the market and these ups and downs are not unusual.

One factor influencing the drop in value is a slowdown in supply. Iron ore supplies have increased significantly in recent weeks, which has had a negative impact on other metals that are harder to produce. The United States dollar has also been falling, which has had a direct impact on metal markets. The Dollar has a direct influence on the value of commodities and a weak dollar usually means that investors will be in for some tense periods.

Some analysts have put metal price drops entirely down to the Dollar, linking every major move to the fluctuations in the world’s most traded currency. The good news is that the Japanese Yen has stabilized in relation to the Dollar, so this could be good news for anyone that holds stock on the Nikkei.

Metals On Decline, Are All Stock Markets Performing Well?

North American and Japanese markets are performing well, but there have been losses in Australia. The Australian AXXM index dropped 0.5% this week, largely because of the dip in metal prices. Australia’s economy largely relies on precious metal production and sales, so it’s not surprising to see that shares have experienced losses.

Should investors be worried? The short answer is no.

Falling metal prices can mean losses in stock value but these will likely recover naturally throughout the year as international currencies stabilize. Metals are still a sound investment in the long term, although new investors would be wiser to look at stocks. Tech stocks in particular have continued to perform well, and there is potential for long term gains on the back of continued growth in microprocessor companies (AMD, Intel) as well as aerospace companies like Boeing.

The start of 2018 is positive, despite metals struggling in the third week of January.

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