Thursday, April 4, 2013
Gold and silver have enjoyed outstanding performance over the past 12 years, and technical analysis shows their formidable appreciation vis-à-vis other asset classes. Specifically, gold is up 513%; silver is up 570%; global equities are up 51%; S&P500 Stock Index is up 35%; US Treasuries are up 34%; and the US Dollar Index is down 28%.
The US Dollar Index negative ‘performance’ emphasizes the loss of purchasing power suffered by those in cash, Treasuries and money market funds.
The draconian difference in performances must be the best kept secret in the financial world, because the globe’s total investing public has allocated their investments like this: bonds 49%; equities 37%; money markets 9%; alternative investments 4%; gold 1%.
Clearly, only the most sophisticated and well-informed investors have any allocation to gold.
This will likely change in the future as impetus for gold investment growth is fuelled by: more precious metals ETFs; central bank buying; increased media advertising of precious metals products; global currency wars; and more QE in the US, the Eurozone and Japan.
Economics 101 dictates that when demand for a commodity increases and supply is either stable or diminishing, the price of that commodity must inevitably rise. In the case of gold, annual supply is flat. Silver, however, has yearly deficits, because more than 60% of the annual mine production is consumed by industrial usage.
In view of all this, one can only guess at how much gold and silver will rise during the next ten years. Some experts say gold could reach $15,000 – and of course silver runs in gold’s shadow, albeit with higher volatility.
There will inevitably be periods of consolidation (corrections) when precious metals rise too far too fast. However, these should be regarded as buying opportunities that allow astute investors to accumulate gold and silver at bargain prices.
Posted by Unknown at 3:00 PM