Adding a bit of gold and silver, only a well-diversified investment portfolio. So save your hissy fits and hate mail for someone else. I have enough of either one year ago when I was slightly negative in a column on gold.
I must tell you, but I do not believe that precious metals prices rise, since the end of the world around us. That can happen only once, and it is difficult to time the market.
And I do not think the Queen of England, the Trilateral Commission or the Illuminati trying to dominate the world and our currency into papier-mache.
That they, too, there is no denying that these are two precious metals rally of over one year.
While rising gold prices have dominated the headlines as the price of the metal hit a record of almost $ 1,300 per ounce, the rally in silver is even more impressive.
So far this year, gold prices climbed 18 percent, and silver has risen 24 percent. By comparison, the fair is to only 2 percent.
Of course investors in gold and silver in times of economic and political turmoil, and we have plenty of both recently. That explains much of this upside prance.
Inflation drops
But what has amazed me is that precious metals prices continued to rally even as the threat of inflation – at least in the near future – has declined. Gold and silver are good hedges against inflation, or at least that is the general opinion. But inflation – excluding volatile food and energy sectors – is a 40-year low.
So I spoke with Joe Foster, portfolio manager of the New York-based Van Eck International Gold Fund (INIVX), his take on this point. His fund, which has $ 1.5 billion in assets, has returned 32 percent so far this year.
Hedges against stress
Foster told me not so much precious metals as hedges against inflation, they are hedges against financial stress. It does not matter whether the source of the stress, inflation, deflation or currency devaluation.
“It goes back to the roots of human history,” he said. “Gold and silver are a healthy form of currency. They’ve always been.”
To put it another way, this rally helped by the fact that people lose faith in their currencies – the dollar, the euro, yen or whatever. If the value of those currencies fall, investors are taking the most logical step of buying precious metals.
“The currencies of major countries, including ours, are under intense pressure due to massive deficits,” said Foster. “The more money that is pumped into these economies – to print money basically -. Then the low value of the currencies are”
In general, gold and silver prices tend to move in tandem. However, silver prices gold prices moved higher on a percentage basis, because they were beaten during the financial meltdown of 2008.
As the economy spirals down into a recession this year, industrial demand for silver dried up, and the price dropped from $ 21.50 to $ 8.50 a troy ounce.
But it made a run of that level and closed just above $ 21 an ounce – the highest price since 1980.
Industrial demand for silver, as in the electronics, is an important part of the price, but when investor demand is even more important, Foster said. It should also be noted that not much trading in silver and in gold, which means that the price movements can be dramatic in a thin market.
Tread carefully
Potential investors should tread cautiously in gold and silver at these lofty levels, just as they should for any investment that runs hot. Gold and silver prices could change drastically lower if, for example, these deficits affected governments – including those in the U.S. – their fiscal houses in order and had stabilized their currencies.
But that is not likely to happen soon, so Foster has a target price for gold of $ 2,000 per ounce in the next three to five years, and silver can easily exceed $ 24 per ounce.
So to all you gold and silver bugs, just go a party and you do not invite me.
source:Resource Investor
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