The Long Term Outlook For Gold And Silver

November 1, 2008 | By | Reply More

The long term outlook for gold and silver becomes more and more encouraging with each passing day.

Despite the recent disappointing performance of both precious metals, particularly this last week, signs are that investors who hold their nerve will eventually reap a rich harvest of dollars.

What those dollars will be worth is another matter but before long gold and silver will be the only game in town for protecting their value. Do not be misled by the current strength of the dollar however long it may last.

Keep in mind that this is against other weakening currencies and has little to do with its eventual purchasing power.

The same applies to any other fiat currency.

De-leveraging continues and is having its dismal affect on all commodities as well as the stock markets but for how much longer is anybodies guess.

Just maybe there are signs that it is slowing as US markets finished the week on a firmer note than of late, or could it be a recognition that there are some oversold bargain stocks screaming “buy me”.

Then again, perhaps optimistic investors think that stock markets have bottomed.

The fact is we are in unknown territory and the game is far from played out.

However one piece in the jigsaw is an easy fit. Eventual hyperinflation is a must as interest rates are dropping fast around the world while governments, desperate to stimulate growth, throw money around hoping for a short-term fix without a regard for the inevitable consequences.

Whether deflation is avoided or not, stoking inflation by printing more money at the same time as lowering interest rates has enormous repercussions on poor old “ Joe the plumber”.

Naturally the politicians will continue to prioritise their own interests by staying in office as long as they can while voting themselves ever increasing salaries and ensuring that when they return to the ranks they pick up some plum directorships.

This is the reason why inflation holds no fear for these privileged charlatans.

 

When did you last hear of an impoverished ex politician?

 

When the demands on outstanding debt are relieved and borrowing returns to traditional levels of risk, the investment community will no longer turn a blind eye to the inflationary pressure about to burst upon the world.

Gold, silver and those sound businesses involved in essentials will provide the cushion against the falling value of paper currencies.

We doubt that this will come to pass this year, it may be at any time in the next 18 months to two years but make no mistake, it will surely happen.

Of course gold may start its ascent in time for Xmas if the buyers of December futures ask for delivery of the physical metal on the basis that premiums over the paper price remain higher than the norm.

If this situation becomes more than a possibility then it is probable that with declining production, and supply having difficulty in meeting increasing demand, physical gold premiums may go much higher.

If readers research the pros and cons of this scenario and come to the conclusion that there is a profitable play to take advantage of, take a look at Bullion Vaults for easy access to dealing in gold bullion.

Finally we think that Platinum is just about at rock bottom and has nowhere else to go but up. Friday’s New York close saw the metal at $819-$829 an ounce having been as high as $2300 in March this year.

Despite the large fall off in global vehicle sales Platinum is an essential component of eco- friendly exhaust systems, so some demand will become evident sooner or later as manufacturers stockpiles become depleted.

A recognition of the value of Platinum may be its bounce of just above $750 an ounce at the beginning of the week. Whilst it may flatline for a time, patient investors could enjoy a decent return.

Well worth some time investigating the outlook for the metal together with Rhodium and Palladium, both are also essential to catalytic exhaust systems.

Their miners have taken a big hit so this may be the best route to play out this market. When researching PGMs don’t forget to look at factoring in recycling as these metals are used largely as catalysts so are not chemically altered and that PGMs are in many cases by-products of other mining activities.     

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