In the past few weeks, the world has experienced significant geo-political changes:
earthquake in Japan, falling of dictators and unfortunately, much more. All of these events spread a sense of insecurity among the investors, who look for “safer” investments during the storm.
Such investments could be in metals including gold and silver. The investment can be made through CFDs of metal index such as XAU (Gold index), ETF such as SLV (silver) or even a direct buying of shares of metal miners firms such as GG , AU, SSRI.
It is very important to understand that putting your money in one of the above, is not safer than any other security. People intend to believe that if they buy something real such as ounce of gold, their money couldn’t be vanished. Though, the truth is that metals are not the perfect escape from the storm in the markets, and many investors lose their money.
On the other hand, it is not a complete mistake to say that investing in metal during crisis is a good idea. Metals have risen 5%-10% since the crisis began and dozens of percent during the past few months. People will always see metals as a safer investment, and that’s why metal prices keep rising up, though there is no obvious reason.
Perhaps rephrasing that to remove “it is not a complete mistake” and replace it with “it is abundantly clear” would be a more accurate description. Taking Oct '07 as the start of the collapse Gold has doubled in value and Silver has tripled in value. There’s very, very few asset classes out there that can boast the real return of Gold.
And to say there’s no obvious reason is to ignore the obvious. People buy precious metals because they remain a store of wealth. Human history has always given value to gold and this shows no sign of going away. In times of uncertainty or in times where the potential for inflation to erode wealth significantly is rearing it’s head people put their money into something which will retain it’s value even if the currency of the land does not.
I totally agree with what was said above about gold and other metals. You have to remember that beyond that people see gold as an asset, relatively safe, they mostly see it as protection against inflation. So these days where the world’s central banks infuse money into the financial system, causing fear of inflation, what is manifested by an increase in market inflation expectations and a rise of gold to a historic record.
Many investors to buy into the market, expecting that the price would continue to move up, a classic action that creates a bubble. This bubble in prices seems to be deflating, creating a bear market situation. Imagine being a trader in the physical silver market which has pretty much been somnolent for decades. Within the span of a few months not only does the actual dollar value of the physical soar–but the volumes soar as well. Thus, Plunging commodity prices leaving investors jittery.