The price of silver hit a new high today, while gold is treading water, at least for the time being. There are numerous factors at work, but the fact remains that all of the precious metals have made heroic increases over the past year. This trend will continue for a variety of reasons. If you are sitting on the side lines wondering if precious metals and particularly silver, will be a good investments, keep in mind that silver is historically under priced with respect to gold. That gap will narrow. Silver is now as of 2/10/11 trading at today's near historic high (see chart).
Silver and Silver Bullion Is Today's Hero, but all Precious Metals are Winners
There are now incredible forces at work: geopolitical, market demand and economic (tied in with the Fed). All of these forces will over time, push the precious metals market to new heights. The stock market has made some recent incredible strides, but typically one has to wonder, with the uncertainty in play, how long can the equity markets stay in positive territory?
Consider the Mideast on Precious Metals, Petroleum and the Economy
The most unpredictable element is what is happening in Egypt. As reported by CNN today, negotiations with Mubarak have long since passed and the fear, of course is that the Muslim Brotherhood, the best organized and most extreme force in Egypt will not wait for any orderly transition. As long as this is unresolved, the price of precious metals may rise. The price of oil and gas at the pump may start to spike. Certainly, the economy is in an unsteady and fragile recovery. If oil rises precipitously, the stock market could slip, but the inevitable result will probably be upward pressure on the prices of precious metals.
In previous articles, it had been pointed out that silver is regaining some lost momentum. However, if one looks carefully at the stats on silver pricing versus gold, there appears to be a mini boom in silver. At the same time, gold is increasing certainly, but more slowly than silver. All of the metals are moving upward as the Obama administration toys with monetizing the debt. The problems in the mid east should give the administration some pause. Knowing that the economy is so fragile and realizing that gas prices could surge over $4.00 per gallon, they would have to be concerned about a weak US dollar, and a shaky economy just in time for the 2012 elections.
The net result of everything may be a longer term stagnant economy, high fuel prices and an unemployment rate still hovering at or above 9%. With that potential scenario in play, precious metals may rise spectacularly. The only equity issues that would rise will be those involved with the production and distribution of petroleum. Obviously anyone in the business of oil will profit from the increased prices of petroleum. One final thought: real estate of a specific kind, specifically short term resort homes/condos is another place to allocate funds that can continuously deliver returns for as long as an owner manages his property.
While it is too late to jump into oil investment other than the stock markets, and real estate may require too much hands-on effort, precious metals will always be a time-honored safe haven for risk capital.
Nick Schklair - Nick Schklair, author, writer and business consultant has published a work on business startups in today's economy.
