Why precious metals aren’t in a bubble

 EmailPrint This Post Print This Post

The post below is a guest contribution by Dr Jeffrey Lewis, author of the Hard Money Newsletter Review and Silver-Coin-Investor.com.

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.

Did you enjoy this post? If so, click here to subscribe to updates to Investment Postcards from Cape Town by e-mail.

More on this topic (What's this?)
Has Gold & Silver Finally Bottomed?
Gold Price Gravitating Lower Towards $1000
Read more on Gold, Precious Metals, Silver at Wikinvest
OverSeas Radio Network

Leave a Reply

You can use these HTML tags

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

  

  

  

Top 100 Financial Blogs

Recent Posts

Charts & Indexes

Gold Price (US$)

Don Coxe’s Weekly Webcast

Podcast – Dow Jones


One minute - every hour - weekdays
(requires Windows Media Player)
newsflashr network
National Debt Clock

Calendar of Posts

December 2009
MTWTFSS
« Nov Jan »
 123456
78910111213
14151617181920
21222324252627
28293031 

Feed the Bull