Silver is at a six-month low and gold has dropped price significantly over the week to create the perfect opportunity for interested investors to move into these metals. The U.S. economy is showing some sign of recovery and anxieties are abating in the nation regarding a possible second financial crisis. While a flourishing economy is not the right environment for precious metals to fare well, there is enough uncertainty in global economics to ensure that the current gold/silver price fall is a temporary phenomenon. Irrespective of whether the U.S. economy will improve or will be able to sustain improvement or not, gold and silver are great assets to buy into right now.
Why is the Price Down?
Many factors have combined to bring the price of two of the most popular precious metals down in recent days. The U.S. housing-starts data is finally giving a clear indication that this year may be witnessing a recovery in the economy. Until now and especially during the recession, housing was the worst hit segment in the U.S. In many cities, the prices of property remained at an all time low even though improvements were evident in all other sectors.
The improvement in the stock market also indicates that better times may be ahead for investors keen on equities. The S&P 500 has risen by 6.9% over the year, in contrast to gold which has dipped by nearly 6%.
Soros’s Gold Sale Sparks Unease about Investing in Metals?
Billionaire and world-renowned investor George Soros created a buzz of sorts in the markets recently. He sold his stake in gold backed exchange traded products significantly over the past quarter. Fellow investor Louis Bacon followed the example to sell his complete stake in SPDR fund as well as reduced exposure in the Sprott Physical Gold Trust. These actions, especially Soros’s, have shaken up the confidence of the gold investing community. However, many analysts are of the view that the billionaire investors have not sold their stake because they fear gold devaluation but simply because they spotted a short term opportunity in the market.
Global Economic Scenario Still Shaky
Elsewhere, in Europe, the conditions are not quite so heartening. In Germany the economy has shrunk by 0.6% over the fourth quarter while France has shown a contraction of 0.3%. The Japanese economy is in a recession showing that the worst is not yet over here.
Given this, gold and silver may remain subdued over the short term in U.S. markets but the slightest hint of problems in the economy will send investors hurrying back to buy these safe haven metals. The same is true even if the European situation appears to be getting worse. One thing is clear, even if the American economy is well on its way to recovery, investors are not likely to sideline wholesale gold and silver completely since other large economies are still under water with no sign of any effective solution in the horizon.
About the author:
In fact, when I was first learning how the financial system ‘really’ worked and before I knew how to safely invest in gold and silver the smart way, I had to take a deep breath and pray because the information seemed so overwhelming and complex.
While our stories are not all the same, it is important that we both understand I started this company built upon a decade of learning every intricate detail of the precious metals market to not only hedge against inflation properly but also help others do the same.