Precious Metals

Canada is blessed with rich deposits of gold and silver. These precious metals have been used as currency since the ancient times. Demand for gold and silver is determined by investor demand, jewelry demand and industrial use. The same factors that are driving up the prices for all commodities also apply to precious metals. They include a weakening U.S. dollar. Because commodity transactions generally settle in U.S. dollars, a depreciating dollar makes its cheaper for non-Americans to purchase commodities. The other is the burgeoning middle class in developing countries like China and India that is creating strong demand particularly for gold.

Of the two precious metals, gold is the most actively traded and generally the most sought after. During times of uncertainty and high inflation, investors tend to migrate towards hard assets. Gold is favored due to its liquidity and its history of being used as a currency. Traditionally, if investors lose confidence in the U.S. dollar, they migrate to gold.

For investors seeking leveraged returns to the appreciating price of precious metals, they would look at high costs Canadian mining companies and Canadian mining companies with profiles of increasing production. In a rising price environment, the percentage return on the shares of these precious metals companies tends to outperform the percentage returns on the commodities itself. As for the investor seeking aggressive returns on precious metals companies, they would look at Canadian exploration companies focused on finding the major mineral deposits.