Can Precious Metals Save Investors As Inflation Continues To Soar?

Every corner of the globe is feeling the brunt of the current wave of inflation.

With prices of goods and services skyrocketing, people have been forced to readjust their budgets to survive in what looks like recurring global financial turbulence.

Inflation is a common problem that affects economies. It causes a decrease in the purchasing power of money and an increase in the prices of goods and services in an economy.

Inflation can occur when prices rise because of increases in production costs, such as raw materials and wages. A surge in demand for products and services forces consumers to pay more for products.

The global inflation outlook doesn’t look good. Just when economies were picking up the pieces from the devastating COVID-19 pandemic, the ongoing Russia-Ukraine conflict has compounded global resource supply issues further.

Global inflation is forecast to reach 7.9% in 2022 and move towards 5.0% in 2023, compared with the 2001 to 2019 average annual global inflation of 3.8%.

In the United States, the annual inflation rate unexpectedly accelerated to 8.6% in May 2022, the highest since December of 1981.

What Does Inflation Mean For Investors?

Investors are on edge when inflation rises because of the potential impact it could have on their investments. Over the years, investors have used a strong weapon — metals — to mitigate adverse effects during economic downturns.

Real assets — like precious metals, base metals, agricultural commodities, oil, real estate and equipment — have functioned as strong hedges against inflation because of their intrinsic value. 

Precious metals, for example, are used as a hedge against inflation because they retain their value. Investors view these metals as good long-term investments because of their portability and tangible properties.

Over the past decades, precious metals like gold seemed to have done well, unlike other investments whose performance was less stellar. Gold has averaged a compound annual growth rate (CAGR) of 7.86% from 1970 to 2017, making it attractive to investors.

Good Time To Look At Precious Metal Company Stocks?

Stocks like American Manganese Inc. AMY, SSR Mining Inc. SSRM, Newmont Corp. NEM and Contango ORE Inc. CTGO can act as inflation shock absorbers.

These companies are ramping up operations to ensure the market doesn’t lack necessary metals for investments and technology needs.

For example, lithium-ion batteries have become pivotal in modern-day technology — the batteries power smartphones, laptops, medical devices and electric vehicles (EVs).

The wide adoption of these batteries and the push for renewable energy are fueling the exponential growth of the global cathode materials market. The sector is expected to be worth $22.87 billion in 2026, progressing at a CAGR of 6.10% from 2022 to 2026.

But while the growth numbers look exciting, the market could be challenged by the unavailability of raw materials, storage and transportation issues and advancements in cathode development. But the story is exciting as more investments make their way to the sector.

Investment ramp-up could be good news for companies like American Manganese, a critical metals and technology-driven company focused on lithium-ion battery recycling using its RecycLiCo™ patented process.

The company reports that it has developed an efficient way to recycle and upcycle the batteries, making it possible to reintroduce the critical materials back into the supply chain or directly integrate them into the re-manufacturing of battery cathodes using minimal processing steps.

American Manganese says it uses a closed-loop RecycLiCo™ patented process that recovers up to 100% of the cathode metals from spent EV batteries.

The Surrey, Canada-based company further claimed it achieves high recovery and purity of materials such as lithium, cobalt, nickel, manganese and aluminum from cathode chemistries such as NCA (lithium nickel cobalt aluminum oxide), NMC (lithium nickel manganese cobalt oxide), LCO (lithium cobalt oxide) and LMO (lithium manganese oxide).

The U.S. Government recently published a list of 50 critical minerals, and the Executive Order signed by President Biden declaring a national emergency to expand the domestic mining industry could put American Manganese in an advantageous position as it moves into the future.

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