March 19, 2009 – Gold And Silver Investments

How much higher can gold and silver spot prices go this year, anyhow?

The markets for precious metals has been dramatic since the end of 2008, when gold and silver spot prices began a rise that continues months later. However, as gold and silver futures close in on the $1,000 per ounce level, some market-watchers are starting to wonder whether the rise in the price of these metals will continue to be fueled by a seemingly endless supply of bad economic news or, if fears about currencies and hyper-inflation will make those who invest in gold and silver wish they’d kept their stock in condensed soup.

There are several ways to try to analyze the past performance of gold and silver bullion markets, but as investment advertisements will routinely tell you, “past performance is no indication of future performance.” Of course that doesn’t mean that you can’t get a leg up by studying the way precious metals have behaved in the past as contrasted with general and specific economic conditions and market forces at work. It is also useful to note just how people were behaving when they buy gold and silver during historically similar times.

Some economic theorists (and a much larger number of armchair enthusiasts), have speculated that markets fluctuate in a somewhat predictable way, due to the complex interactions of additive waves of price movement. When all the waves are lined up, one direction or another, major events happen. When they are balanced, markets remain placid, continuing a small but steady upward track.

Volatility can have a feedback effect on investors. The ups and downs of metals vs. the markets during difficult times is just enough excitement to attract gold and silver investments from novices who know little about the commodity, much less the nuance of what news items in the precious metals sector really mean. This does not, however, have a rational influence upon gold and silver spot prices.

Another thing to consider is what gold will do for you other than to act as a type of protection in terrible times? It is something like a bank in some regards – it doesn’t really create more opportunities, it’s more like an insurance policy, if the normal avenues of high gains are not successful – like hoarding under a loose floorboard for a rainy day.

But could gold really be on a bubble that is about to burst? That sentiment has been raised more vociferously since gold futures went over about $950 per ounce. Demand from the largest sector of the precious metals market, jewelery, has dropped dramatically since 2008 while production has ramped up. It has only been the interest of large fund managers and vast consumer interest in gold and silver investing that has kept overall demand buoyant.

However, those who study investment behavior suggest that gold and silver spot prices will continue to rise to historic highs, not seen since the 1970s in terms of real value. However, unless something drastic happens to undermine currencies worldwide, the price will have to respond to physical market forces at some point.

Because many market-watchers continue to see market unease and danger for currency trading into early 2010, it is possible that gold will continue on a long upward trajectory for some time before heading back down again, but it will eventually come down, and when investors begin to shy away from precious metals, the change could be sudden.

Joseph Morton

March 19, 2009

Get Your Complementary Award Winning Guides Below

 Publish Real Money Magazine

 Publish Gold Investment Magazine

 Publish IRA 401K Kit Magazine

 Real Money Magazine