UNDERSTANDING THE MARKET FORCES DRIVING UP THE COST OF RAW MATERIALS

You may have noticed that everything seems a little more expensive lately. While the price of your weekly shop is one indicator, the raw materials behind the scenes, such as gold, oil and copper, have been on a significant upward trajectory over the past few years. This trend isn’t just about jewellery becoming more expensive; it signals deeper shifts in the global economy.

Several factors have created a perfect storm for these price hikes. Understanding these drivers can help clarify why the cost of goods and services continues to rise and what it means for your financial outlook.

INFLATION: THE PUSH TOWARDS TANGIBLE ASSETS

One of the most significant drivers of rising commodity prices is inflation. When the general price of goods and services rises, the purchasing power of money falls. A pound today buys you less than it did last year. This erosion of value pushes individuals and institutions to seek out assets that can maintain their value over time.

This is where tangible assets, particularly gold, come into play. Gold has a long-established reputation as a reliable store of value. Unlike fiat currencies, which central banks can print, the physical supply of gold is finite. During periods of high inflation or economic uncertainty, investors often flock to gold, viewing it as a ‘safe haven’ to protect their wealth. This increased demand naturally drives up its price.

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This article does not constitute financial advice and should not be relied upon as such. For guidance, seek professional advice. The value of your investments (and any income from them) can go down as well as up, which would affect the level of pension benefits available. Investments can fall as well as rise in value, and you may receive back less than you invest.