Nowhere to be seen, because the
prices have fallen dramatically over the past 3 years. In fact, the prices of
precious metals have dropped so much that investors forgot that they are even
an option. The gold has descended to the $1,232 mark and has been oscillating
in that range for a while. Some wonder if precious metals are still worth
the investment. George Soros certainly thinks so. He is known to hedge his
capital in gold and silver before the expected “financial shock”.
In the aftermath of the Great Crash of 2008, gold and silver prices continued to rise, thereby reinforcing many
wild speculations that the price of gold will reach $2,500 and beyond. Of
course, it never did. Precious metals like any other financial instruments
require undivided attention and constant scanning of the environment. The
economic, political and social forces shape the value trend of every commodity
in the marketplace. However, a mere “hope” cannot be traded in open markets.
I believe that hope is what drove
many people to buy gold and silver coins with an inflated expectation that they
will reap great wealth in the near future.
It should be remembered, that gold
and silver are good hedging financial vehicles and long term investment tools.
Precious metals are fantastic to diversify your portfolio, but poor for short
term trading. If you are looking for a high risk / high return instruments,
stock market is your best choice.
Following the Great Recession of 2008,
a number of radio talk show hosts and TV pundits were advising every freedom
loving patriot to purchase gold and silver to protect their financial
portfolios. Some commentators went as far as stating that everything will crash
and the country will descent into chaos and destruction. The only protection
they saw was canned food, bullets and real gold. As is usually the case, the
doom and gloom scenarios never materialize.
Gold kiosks and exchange
shops were sprawling across the country and folks from all walks of life
were getting into precious metals. These actions have driven the prices
up to unprecedented levels and reinforced the inflated expectations of
rapid wealth creation. The lucky bunch had made money in the bullish trend,
while others procrastinated and ended up with the cheaper commodities.
Wealth managers consider gold and
silver as hedging mechanisms that they employ in the volatile economic times.
However, precious metals have remained part of a relatively long-term
investment strategy.
Furthermore, the current
macroeconomic indicators show that the US economy is continuing to improve,
thereby suppressing gold and silver prices.
For almost three years, silver has been
in the bears market and the price has fallen to a new low. Technical analysts
predict that silver will continue to trade sideways due to the uncertain
political climate. This trend will be partially determined on the outcome of
the conflict between Russia and Ukraine. Geopolitics is a known factor of influence
in the financial markets.
What is the lesson
learned? Markets are volatile, dynamic and prone to change. The market
place is susceptible to the gravitational forces that will bring the inflated
expectations down to the grim reality of supply and demand.
For instance, currently the silver
is trading at $18.69 per ounce and it is difficult to predict where it is heading
next. It might reach a base level and shoot back up to the upper 20s or remain
in the teens until the next crisis. The prediction that silver will reach $50
mark is unrealistic at best and deceiving at worst. We are more likely to
see silver to trade sideways and continue to stay in a $15-20 price range.
Therefore, my recommendation is to
refrain from accumulating gold and silver. For silver, I would wait until the
price drops to mid-teens (or gets close) and then make buying moves. For gold,
the geopolitics will decide where our money will go.
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