Gold and silver bullion have been popular investment options for centuries, and they are often viewed as a hedge against inflation during economic uncertainty. Various factors, including global economic conditions, influence these precious metals prices. In this blog post, we will explore the impact of global financial constraints on gold and silver bullion prices.
Global economic conditions refer to the overall state of the world’s economies. Economic conditions are influenced by various factors, including inflation, interest rates, GDP growth rates, and geopolitical events. When global economic conditions are stable, the price of gold and silver bullion is relatively stable. However, when global economic conditions are uncertain or volatile, the prices of these precious metals can fluctuate significantly.
One of the primary ways that global economic conditions affect the price of gold and silver bullion is through inflation. Inflation occurs when the value of money decreases, and price of goods and services increase. When inflation occurs, investors often turn to gold and silver bullion as a safe-haven investment option. This is because the value of these precious metals tends to increase during inflationary periods. As such, when global economic conditions suggest that inflation is likely to occur, the demand for gold and silver bullion increases, leading to an increase in their prices.
Another way that global economic conditions impact the price of gold and silver bullion is through interest rates. Interest rates refer to the cost of borrowing money. When interest rates are low, it becomes cheaper to borrow money, which can stimulate economic growth. However, when interest rates are high, borrowing becomes more expensive, which can slow down economic growth. High-interest rates can also lead to a stronger currency, which can reduce the demand for gold and silver bullion as a safe-haven investment option. As such, when global economic conditions suggest that interest rates are likely to increase, the demand for gold and silver bullion may decrease, leading to a decrease in prices.
GDP growth rates also have an impact on the price of gold and silver bullion. GDP growth rates refer to the rate at which the economy is expanding. When GDP growth rates are high, it suggests that the economy is healthy, which can lead to increased demand for goods and services. This increased demand can lead to inflation, which, as mentioned earlier, can lead to an increase in the demand for gold and silver bullion. Conversely, when GDP growth rates are low, it suggests that the economy is weak, which can lead to a decrease in the demand for gold and silver bullion.
Finally, geopolitical events can also impact the price of gold and silver bullion. Geopolitical events refer to events that affect the relationship between countries, such as wars or natural disasters. These events can cause uncertainty and volatility in the global economy, which can lead investors to seek investment options such as gold and silver bullion. As such, when global economic conditions suggest that geopolitical events are likely to occur, the demand for gold and silver bullion may increase, leading to an increase in their price.
In conclusion, global economic conditions significantly impact the price of gold and silver bullion. When global economic conditions suggest that inflation is likely to occur or that geopolitical events are likely to occur, the demand for gold and silver bullion tends to increase, leading to an increase in their prices. Conversely, when global economic conditions suggest that interest rates are likely to increase or that GDP growth rates are low, the demand for gold and silver bullion may decrease, leading to a decrease in their price. Investors should pay close attention to global economic conditions when investing in gold and silver bullion to make informed investment decisions.
If you have more questions about investing in gold or silver bullion, our experts at CanAm Currency can help. Call us today for a free quote or visit www.canamcurrency.com for more information.
Globalization has largely been a blessing to business owners, as it has introduced them to an international business landscape they otherwise would never have been exposed to. Because of this interconnectedness, international businesses have access to a much wider customer base, as well as the opportunity to compare goods and services from around the world. Yet, these same businesses must now also deal with the complexities associated with different global markets.
With international businesses and markets being as connected as they are, understanding foreign currency exchange rates and their implications for international business is essential. As such, we will be discussing what exchange rates are, how they affect international businesses, and how companies can make the most of exchange rate fluctuations.
What are Currency Exchange Rates?
Understanding foreign currency exchange rates is essential to doing business in the international market. Quite simply, a currency exchange rate is a measure of the value of one currency compared to the value of another. For example, if the exchange rate between the Canadian Dollar (CAD) and the U.S. Dollar (USD) is said to be 1 to 0.75, it means one Canadian dollar is worth 75 cents in U.S. dollars, and vice versa.
The value of a currency is determined based on an assessment of a country’s economy, political situation, international trade, and interest rates, as well as market sentiment. An important thing to note, however, is that exchange rates are not static. They change over time.
Exchange rates are set in the global financial marketplace where banks and other financial institutions trade currencies 24/7. As the factors that determine the value of a currency change, exchange rate fluctuations occur. Exchange rates follow the ebbs and flows of international demand, meaning that rates can fluctuate from minute-to-minute or day-to-day. Some shifts may be subtle and others may result in substantial changes. It is important for international businesses to keep an eye on these currency fluctuations so they may make sound business decisions.
The Ways Exchange Rates Impact International Businesses
Foreign exchange rates and foreign currency conversion fees can affect an international business in a number of ways. Here are the top three impacts:
Profit and revenue: Fluctuations in exchange rates can have a sizable impact on the revenues and profitability of businesses. Exporters, for instance, will find their revenues decrease if the value of their domestic currency rises against the one used by their foreign customers. Conversely, importers will experience an increase in costs should the value of their domestic currency decrease against the foreign currency they rely on to purchase goods.
Competitive standing: A strong domestic currency can make products prohibitively expensive for overseas customers and thus reduce a business’s chance of success in those markets. On the other hand, a weak domestic currency can make those same products more accessible, giving a business an advantage over its international competitors.
Cash flow: Exchange rate fluctuations can present a unique issue for businesses in terms of cash flow. For instance, if a company has borrowed a sizable amount of capital in a foreign currency, its debt will increase if the value of its domestic currency decreases in comparison to the foreign currency.
How to Manage the Impact of Changing Exchange Rates
There are several strategies businesses can employ to mitigate exchange rate risk and make the most of fluctuations across different financial markets:
Compare suppliers: If the domestic currency of a business that uses international suppliers weakens, their imports become more expensive. To remedy this, businesses can switch to domestic suppliers or suppliers where the country’s currency offers a more favourable exchange rate. Inversely, as a business’ home currency strengthens, they can look to negotiate more favourable terms by leveraging the strengthening exchange rate.
Spot contracts: Spot contract money transfers offer businesses a great way to save on their currency exchange costs. They allow a business to pause a money transfer until a desired foreign exchange rate is achieved and avoid having to pay out at unfavourable rates. This process might take some time, but in the long run it can save businesses considerable money and protect them from poor market performance.
Forward contracts: A forward contract allows a business to lock in an exchange rate for a future transaction, so they know exactly how much funds they will receive at the time of completion. This eliminates the possibility of the expected income being reduced by unfavourable exchange rate movements in the intervening period between agreeing to a transaction and actually receiving payment.
CanAm Gives You Access to the Best Exchange Rates on the Market
If you’re a business owner looking to successfully navigate the foreign currency market and use exchange rates to your advantage, CanAm Currency Exchange’s business services in Windsor and throughout the rest of Canada can help.
With the access we provide to the best rates on the market, along with our service offering which includes hedging strategy advising, USD/CAD market analysis, forward contracts, spot trades and more, CanAm has solidified itself as one of Canada’s top currency exchange companies, known for helping businesses and individuals make the most of their money. Contact us today for more information.
When it comes to investing, diversification is key. Having a variety of assets in your portfolio can help spread risk and potentially increase returns. One way to diversify your portfolio is by including gold and silver bullion.
Gold and silver have been a store of value for centuries and can play an important role in portfolio diversification. These precious metals have a low correlation with other assets, such as stocks and bonds, so their prices tend to move independently of different investments. This can help reduce the overall volatility of a portfolio and provide a hedge against inflation.
Investing in gold and silver can also provide a safe haven during economic uncertainty. When the stock market is performing poorly, the price of gold and silver tends to rise as investors flock to these safe-haven assets. This can help offset losses in other parts of the portfolio.
When investing in gold and silver, choosing the right type of bullion is essential. Gold and silver coins, rounds and bars are the most common forms of bullion, and they can be easily bought and sold through dealers or online. It’s also important to note that gold and silver bullion can be stored in a variety of ways, such as at home, in a safe deposit box, or with a professional storage provider.
Remember that gold and silver prices can be volatile, and their value can fluctuate based on factors such as global economic conditions, mining supply, and demand. It’s a good idea to consult with a financial advisor or do your research to decide on how much gold and silver you want to include in your portfolio.
Another vital aspect to consider when investing in gold and silver is the long-term potential of these precious metals. Historically, gold and silver have shown long-term growth, with gold prices increasing by an average of 3.5% annually over the past 50 years and silver prices increasing by an average of 5.5% annually over the same period. This long-term growth potential can be especially beneficial for those who are investing for retirement or other long-term financial goals. For more info on gold prices visit https://goldprice.org/gold-price-history.html
Another benefit of investing in gold and silver is that they can be easily liquidated in times of need. These precious metals are widely recognized and accepted and can be easily sold to a dealer or online. This can be especially useful in times of economic uncertainty when other forms of investments may be difficult to liquidate.
It’s also worth noting that while gold and silver can be a great way to diversify your portfolio, they should not be the only form of investment. It’s essential to have a balanced portfolio that includes a variety of assets, such as stocks, bonds, and real estate. The right mix of investments will depend on your individual financial goals and risk tolerance.
Investing in gold and silver also has its drawbacks; for example, the price of bullion can be affected by global economic conditions like supply and demand. Moreover, the storage and insurance of physical bullion can be costly.
In summary, investing in gold and silver bullion can be a valuable way to diversify your portfolio, providing a hedge against inflation and economic uncertainty. However, it’s important to consider the long-term potential of these precious metals, their liquidity, storage cost, and to consult with a financial advisor before making any investments. It’s also important to remember that gold and silver should not be the only form of investment in your portfolio and should be balanced with other forms of investment to diversify the risk. For more information regarding gold and silver bullion, visit www.canamcurrencyexchange.com.
Investing in precious metals like gold and silver bullion is a popular strategy for diversifying one’s portfolio and protecting against inflation and market volatility. However, buying and storing physical bullion can be intimidating for beginners. This blog will explore how to buy and store physical gold and silver bullion.
The first step in buying gold and silver bullion is determining how much you want to invest. Precious metals are typically priced by weight, so the more you want to buy, the more you’ll pay. Gold and silver prices are also subject to market fluctuations, so it’s important to research current prices before purchasing.
Once you’ve determined your budget and researched, there are several options for buying gold and silver bullion. One option is to buy from a reputable dealer like CanAm Currency Exchange; we offer a wide range of precious metals at competitive prices. It’s essential to choose a dealer with a good reputation and to check their customer reviews and ratings.
Another option is to buy from a local coin shop or pawn shop. These stores may have a smaller selection than online dealers, but you can see and inspect the products before purchasing. It’s also a good idea to ask the shop owner for their opinion on the current market and which products are best for investment. It’s important to store your gold and silver bullion after purchasing. There are several options for storing physical bullion, each with its own advantages and disadvantages.
One option is to store your bullion at home; this gives you immediate access to your investment and allows you to see and inspect your bullion whenever you want physically. However, storing your bullion at home also carries a higher risk of theft or loss. It’s important to have a secure safe or storage system in place and to keep your bullion hidden and out of sight.
Another option is to store your bullion in a bank safety deposit box. This provides a secure and insured location to store your bullion, but you’ll need to pay an annual fee for the safety deposit box. It’s also important to note that safety deposit boxes are not immune to bank closures or confiscation by government authorities. Finally, you can store your bullion with a third-party storage provider, like CanAm Currency Exchange. These companies specialize in secure storage for precious metals and offer insurance and other benefits.
In conclusion, investing in gold and silver bullion can be smart for diversifying your portfolio and protecting against market volatility. However, it’s essential to research and choose a reputable dealer or broker. When storing your bullion, several options exist, each with its advantages and disadvantages. Whether you choose to store your bullion at home, in a safety deposit box, or with a third-party provider, the most important thing is to keep it safe and secure.
Gold has long been viewed as a safeguard against economic instability due to its lack of correlation with many other assets. Its value typically rises when stock and bond markets falter, making gold an attractive option for investors seeking protection during times of turmoil.
Seeing as physical gold does not correlate to the bond or stock market, it can provide greater security and potentially healthier returns in difficult economic conditions. So how much gold should you purchase? The honest answer is it depends on your future goals and your current circumstances.
What Kind of Investor Are You?
Before you can know how much gold you should own, you have to first identify your goals and your level of risk tolerance. Here are some useful question you should answer before investing:
- How much do I know about investing?
- How stable is my financial situation?
- Am I saving for a big expense like a home, college tuition, or retirement?
- Do I want to buy gold to turn short-term profit, or do you want to buy it as a long-term investment? Maybe both?
- Do I see gold as a way I can mitigate risk in my portfolio?
- Is protecting my investment more important to me than achieving high returns?
Everyone’s answers to the questions will be different, and while they are not enough to dictate exactly what you should do with your gold investment, they can help you decide what your investment approach will be.
Gold Investment Approaches
The percentage of a traditional portfolio that gold should account for depends on your goals, risk tolerance, and investment strategy. Below we detail a general framework you can reference depending on if you want to be conservative, moderate, or aggressive in your gold investment. For advice that is more tailored to your situation, consult a financial advisor.
Conservative Approach
Investing in gold bullion often serves as an effective risk management tool for a diversified portfolio. For medium and long-term investments, investment advisors recommend a conservative 2-5% position in gold to hedge against market fluctuations caused by economic conditions such as inflation and recessions. Having around 5% of your portfolio invested in gold will stabilize and help protect it during times of financial crisis.
As a conservative investor, it is important to reestablish your portfolio’s default allocation as your assets appreciate and depreciate in value. For example, when the price of gold increases and your position grows beyond 5%, sell off your holdings and return your position to 5%; conversely as gold price declines, buy more to return your allocation to 5%.
Moderate Approach
A more moderate investment in gold would represent 5-10% of your investment portfolio, with the exact percentage climbing up towards 10% if you expect an economic downturn in the near future. Savvy investors who increased their gold holdings towards the beginning of the COVID-19 pandemic in 2020 have seen their move pay dividends, as inflation has skyrocketed since.
Aggressive Approach
An aggressive position in gold would be a 10-20% allocation. Aggressive positions like this should be reserved for situations where the economy is performing very poorly and you want to maximize your hedge against it. That said, do not put all your faith in one position; your investments should be spread across 12-20 assets to achieve maximum diversification benefits. Consider commodities like gold and silver, as well as other precious metals and commodity-linked ETFs.
The idea is that the more diversified you are, the less risk you are exposed to. This is especially important when you increase your gold holdings to take advantage of market conditions in the short-term. Adequately diversifying the rest of your portfolio will protect you in the event that your risk does not pan out as expected. As a general rule, you should always be cautious when allocating more than 10% of your money into a single asset.
Where to Buy Gold?
Now that you have a more clear idea of how much gold you should own, the next question is where to buy it? If you’re thinking of buying gold in Windsor, or anywhere else in Canada, look no further than CanAm Currency Exchange.
As a registered dealer with the Royal Canadian Mint, CanAm offers some of the best rates in the market. They offer an excellent selection of gold and silver coins and bars, perfect for diversifying your portfolio. And best of all, they make buying gold quick and easy. Book a consultation today to take your portfolio to the next level!
The idea is that the more diversified you are, the less risk you are exposed to. This is especially important when you increase your gold holdings to take advantage of market conditions in the short-term. Adequately diversifying the rest of your portfolio will protect you in the event that your risk does not pan out as expected. As a general rule, you should always be cautious when allocating more than 10% of your money into a single asset.
A drop in the exchange rate between Canada and the United States has added to the inflation challenges Canadians are currently facing. When the U.S. dollar (USD) value rises against that of the Canadian dollar (CAD), then imports from the U.S., Canada’s largest trading partner, become more expensive for Canadian consumers.
In response to rising inflation, the Central Bank of Canada may keep interest rates higher for longer than initially anticipated. Higher interest rates affect businesses in every sector, and many families in every province may feel the pinch.
Today, we are going to take a closer look at the relationship between exchange rates and inflation, how it can affect currency markets, and why this matters for consumers and investors alike.
What is Inflation?
As an essential economic indicator, inflation is scrutinized heavily in economies around the world. It influences the decisions of central banks and impacts the behavior of financial markets. Rapid inflation in one country can significantly affect the value of goods with its trading partner and cause ripple effects in other economies.
Inflation also affects interest rates; when inflation is high, a country’s central bank may keep its interest rate high to discourage consumers from spending. This reduces the money supply in circulation, making each dollar worth more because the supply is limited. Over time, the reduced, yet more valuable, money supply leads to low inflation.
When consumers spend less money, businesses typically respond by lowering prices which, in turn, can lower inflation. As inflation lowers or stalls, central banks lower the interest rate to encourage people to invest and purchase more.
How Inflation Affects Exchange Rates
Interest rates and inflation affect currency markets and their respective exchange rate, too. In a country with higher interest rates, the country’s currency value likewise increases, so investors get a better return on their investment when they opt to invest in other countries whose central banks offer a high-interest rate, a practice known colloquially as “hot money flows.”
The inflation cycle works something like this:
- The Bank of Canada will raise interest rates in response to inflation
- Savings accounts offer higher investment returns
- The "hot money" flows as investors opt for a higher interest rate
- The demand for CAD increases
- The value of the CAD increases
Investors tend to prefer more stable economies to reduce risk while increasing profit. Investors may also consider whether the exchange and interest rates are in response to economic growth or an effort to tame inflation rates. If they note the latter situation, they may invest elsewhere.
How Inflation Rates Affect Exchange Rates
High inflation typically depresses the value of a country’s currency. Increased inflation increases a country’s purchasing power, weakening it against other, more stable currencies. So, as inflation increases, the currency conversion, or exchange rate, decreases.
Furthermore, as inflation increases, exchange rates become more volatile. Cross-border money transfers, like those between Canada and the U.S., can be more costly. Conversions from CAD to USD may be worth less, increasing the cost of goods. This can also slow economic growth, as consumers are spending less.
The direct result of inflation on the currency exchange rates between the CAD and USD may be felt on a couple of levels:
- Interest rates: Inflation negatively impacts the interest rates, depreciating the currency.
- Purchasing power parity: This compares the general purchasing power of different countries using the general price level of consumer goods instead of the exchange rate. A country's purchasing power changes affect its exchange rate (and inflation).
Final Thoughts on the Relationship Between Inflation and Exchange Rates
Generally, when the two countries’ average inflation rate is the same, the exchange rate will not change. But, when inflation is higher in one country than another, the country with the higher inflation rate will see its value depreciate. If the inflation rate in the U.S. continues to rise, then the value of the USD will decrease. However, because of the interconnected trade between Canada and the U.S., inflation in the United States will also affect interest rates and prices for Canadian consumers.
Do You Need Professional Advice on Currency Trading?
Whether you’re a novice investor or a seasoned one, the team at CanAm Currency Exchange can help you grow your investments, diversify your portfolio, and reach your investment goals. We provide premium financial services, including bullion products and foreign currency trading for individual investors or businesses. We take a cost-leadership approach to personal currency exchange (Windsor) and maximum transparency.
For superior customer service and sage advice, give CanAm Currency Exchange a call today!
Purchasing gold, especially in times when inflation or other economic conditions are volatile, is often recommended by financial professionals. Many veteran Canadian investors may seek to expand their gold holdings, while new investors may wonder what benefits investing in gold has in an economic climate of high consumer prices, rising inflation, and a depressed CAD. With rising gold prices at an all-time high, is gold still a lucrative investment? Does it belong in your portfolio?
This article will provide a brief overview of gold as an investment and four ways to begin investing in gold. When you’re ready to get started and buy gold in Windsor, or wherever else you are in Canada, CanAm Currency Exchange is here to help you through the process.
Why is Gold a Popular Investment?
Unlike real estate, stocks, or bonds, gold does not produce income independently. That is, it does not produce earnings or dividends. The value of gold, like other precious metals, is tied to its value in specie speculation as gold bullion. Even in times of geopolitical uncertainty and high inflation, gold has still seen an increase in price and continues to act as a “safety net” for investors when other markets are more volatile.
During times of rapid inflation, the value of gold rises significantly, making it an excellent hedge.
How To Invest in Gold in Canada
When you’re ready to invest in gold, there are four main ways to do so:
- Buy gold stocks, gold futures, or invest in gold mining companies
- Buy gold exchange traded funds (ETFs), which are commodity funds that trade like mutual funds
- Buy gold bullion, gold coins or bars, or gold jewelry and other decorative items.
- Royal Canadian Mint Exchange Traded Receipts (ETR)
Purchasing Gold Stocks
Gold stocks are primarily investments in gold mining or gold streaming companies. Many gold mining stocks are traded on the Toronto Stock Exchange (TSE), just like stocks for other publicly traded companies.
Like any stock investment, though, your share purchase may be tied to the ups and downs of the gold mining industry and the profitability of the company you choose to invest in. Gold shares and gold futures contracts should be purchased with the same consideration and research that one would do when purchasing shares in a company.
Buying Gold ETFs
Investing in gold ETFs limits your risk, as you’re investing as part of a mutual fund comprising several gold mining companies. Instead of investing in a single gold company, you invest in a collection of gold-related securities in a gold ETF or mutual fund. These funds track the price of gold and may include stocks in several different gold mines or offer investors the chance to participate in gold futures or options.
A gold ETF can be high-risk, high-reward, or more modest, depending on your risk tolerance and investment goals.
One thing to consider when choosing your gold-themed ETF is that gold companies tend to be more volatile as far as value fluctuations than gold itself. For example, investors may see the value of a gold producer fluctuate about 4-5% over time, and the value of gold may only fluctuate about 1-2% over the same period. This is because when purchasing interest in a gold mining company, your investment is tied to both the performance of the company and the value of gold.
Buying Physical Gold Bullion
One of the benefits of buying gold is that you own the gold. It’s physically yours to do with as you wish, and the value is tied to the value of the gold itself, not the performance of a gold mining company or exchange fund.
There are a few drawbacks to this manner of purchasing physical gold. First, you need to have the gold delivered or physically pick it up and find somewhere to store it. There’s also a consideration of insurance. If you plan to store the gold in your house instead of a bank, you may need to add it to your homeowner’s insurance policy.
Liquidity is the chief drawback of owning physical gold. While the specie itself has value, you cannot convert the value to purchasing power without converting it to currency; gold coins can’t be spent like pocket change. Liquidating gold bullion is more complicated than asking your brokerage representative to buy or sell more gold-related commodities.
One benefit to buying physical gold is that you can purchase gold bars and bullion coins in Canada using a tax-advantaged account, like a LIRA, TFSA, or RRSP registered account. If you use one of these types of accounts, then you can receive wholesale discounts on your purchases and usually get the best price for gold. The value of your gold will rise and fall with the gold market.
Royal Canadian Mint Exchange Traded Receipts (ETR)
The final way Canadians can purchase gold is directly through the Royal Canadian Mint’s Canadian Gold Reserves Exchange Traded Receipts (ETR) Program.
It began in 2011 and offered investors the chance to own gold as a traded security. The gold is stored in the mint’s reserve. Investors own the gold directly, rather than through indirect shareholding like with ETFs.
Owners of gold ETRs may redeem their ETR for 99.99% pure gold bars or coins, or cash. The cash value is determined by the lesser of the gold price on the ETR market on the date of redemption and the volume-weighted average price from the previous five trading days and the date of redemption.
Are You Ready to Start Investing in Gold?
If you believe gold is a great addition to your investment portfolio, you aren’t alone. An industry expert from CanAm Currency Exchange can provide more information about how to buy gold, discuss investment options and explain the risks and advantages of this kind of investment.
