Precious Metals

Precious metals are relatively scarce, highly non-corrosive, valuable metals found in periods 5 and 6 of the periodic table. They include rhodium, ruthenium, palladium, asmium, iridium, platinum, silver and gold.

They are associated with security during down economic times. If uncertainty faces the world, investors are told to buy gold and silver.

Is it really a good idea?

Currently, the storm that many gold and silver bugs have been warning us about for years, has finally hit land. The devaluation of the dollar, the subprime crisis and the massive national debt has played its part in the recent rise of precious metal prices. Many analysts are calling for $2000 per ounce gold and $100 per ounce silver.

Gold, like any investment vehicle, can reward its investors with generous short-term to mid-term returns. However, on a long-term basis, evidence indicates that this metal is a poor investment.

Gold reached an all-time high of $850 per ounce in 1980. If the price of gold had kept up with the inflation rate since its high point, it would currently be trading at over $2000 per ounce.

Also in 1980, silver peaked at $54 per ounce. Currently it trades at $14.34. If you had bought silver as an inflation hedge back in the 1970's you would be terribly upset today.

I am not anti-gold or anti-silver, however, they are cyclical like almost every other investment vehicle. And I don't really buy into the idea that if a doom and gloom situation presents itself, precious metals will be used as the medium of exchange. I believe goods and services shall be what people barter with.

One of the most widely used methods of investing in these metals is the futures market. I have personally traded gold futures. The roller coaster ride was more than I could handle. I opted out and concentrated more on growth and safety.

Whether you invest in these metals, generally has a lot to do with your view of the future. If you are optimistic, then it is unlikely you will invest. If you are pessimistic, precious metals will likely appeal to you.

Where do I stand?

I think the USA will recover from the current devaluation of the dollar and from the subprime crisis. It is because of this belief, that I think the long-term outlook for gold is bearish. I personallly would not take a position.

There are many, many who disagree with me.

What about Silver?

Historically, gold trades at about 16 times more per ounce than silver. Currently, that level has risen to about 55 times more.

Is silver undervalued, or is gold overpriced?

I believe it is a mix of both elements. It is probable that silver will rise in price and gold will fall, bringing the ratio back in line to its historical levels.

If this happens, silver could very easily delvier healthy returns very soon.

Precious Metal Recommendations

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