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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Why Precious Metals Aren't in a Bubble

Commodities / Gold and Silver 2010 Dec 15, 2009 - 05:11 PM GMT

By: Dr_Jeff_Lewis

Commodities

Critics of precious metals investing have called gold and silver a bubble, further claiming that today's higher prices will fade as economic conditions improve.  Although gold and silver prices are much more expensive than they were even a few years ago, gold and silver are hardly near bubble status.


Scarce Ownership of Precious Metals

One of the most prominent reasons that gold and silver aren't yet a bubble is that very few casual or institutional investors own physical gold and silver.  A recent poll of professional money managers indicated that fewer than 30% have ever purchased gold for their clients.  Ownership of gold is even rarer in the general populace, as investors have to go out of their way to buy physical metals. 

The small percentage of precious metals investors could double, triple, or even quintuple before gold becomes a mainstream investment, pushing the price up several hundred percent in the interim.

Gold Isn't Speculative

Unlike oil, dot com stocks and even real estate, gold isn't bought and sold to make people rich.  It isn't sold as a get-rich-quick product.  In fact, gold and silver are sold as get-rich-slowly products that help investors retain their purchasing power.  The main purpose to buying precious metals isn't to grow wealth, but to protect it.  Even after the fear of global financial meltdown faded in the spring of 2009, gold and silver prices continued to head higher – not out of fear, but out of a desire to preserve wealth against inflation.

Metals Prices Haven't Truly Grown

While the money supply has expanded tremendously since the early 1990s, gold prices didn't begin their most recent rally until 2002, mostly due to a relatively strong economy.  Therefore, the gains precious metals experienced in the last several years have not been true gains.  Instead, gold and silver have caught up with where they should be.  In fact, even with the money supply increasing 600% since gold last topped in 1980, gold is just a few percentage points higher than in 1980.

Rarity is Always Valuable

There is less gold and silver on the earth’s crust with each passing day.  As precious metals are used in manufacturing, the amount in existence decreases, which subsequently increases the value of each gold and silver coin owned by investors.

Silver's supply decline has been steeper than gold, with much of the past decade's mining products being used in the technology and photography industries. 

Now or Never

While precious metals aren't currently in a bubble, it's impossible to deny that they might soon be.  With so many investors realizing the only way to safeguard their assets from inflation, deflation, and economic calamity is physical metals, it is certain that the price of silver will continue to rally.  From the everyday collector to the institutional investor, precious metals are now on the radar as a safe and reliable investment.  Rather than wait as precious metal prices trend higher, protect your assets by purchasing gold and silver coins today. 

By Dr. Jeff Lewis

Dr. Jeffrey Lewis, in addition to running a busy medical practice, is the editor of Silver-Coin-Investor.com and Hard-Money-Newsletter-Review.com

Copyright © 2009 Dr. Jeff Lewis- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


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