April 18, 2009 – GoldAndSilverInvestments

After taking a major pummeling for months, global stock markets may have reached a practical low that could signal major corrections in gold and silver spot prices for a time. It is not unusual that precious metal commodities, to rise according to the action of other markets that have little primary influence upon the actual demand for use.

For starters, gold and silver have been offered as stocks themselves for a very long time in the form of stock ownership in mining companies. In addition to what many view as a somewhat risky investment, especially in the case of speculative mines that do not have proven and verifiable reserves.

In addition to this, for the last several years, is has been possible to invest in gold and silver even more indirectly in the form of gold and silver bullion electronically traded funds (ETFs). Approved by regulators and brought to financial markets by Barclays in 2002, gold is a very actively traded ETF. There are several different types of gold ETF for those looking to avoid having to store gold and silver bars or coins. ETFs have been available for silver since the mid-‘aughts, also innovated by Barclays.

The influence of stocks is seen throughout commodity trading, but stocks have the potential to affect currencies. Here is where the connection between gold and stocks gets interesting for the investor in real, physical gold and silver coins or bars. As confidence in currencies and their relative position against each other wanes, the spot price of gold and silver almost always goes up.

That said, there has been some speculation as to how gold and silver prices have been moderated by offering the commodity as a stock. The true influence of gold and silver investments with ETFs, mining shares and pure speculation is difficult to tease out, since these markets are all inter-connected to some degree.

However, with these novel investment “vehicles” and the targeted sales of some of the largest stocks of physical gold and silver, spot prices have yet to reach the kind of peaks that many gold and silver investing pundits have been advocating since the collapse of markets in late 2008. While the prices have been on a somewhat volatile upward trajectory, the price seems to continue to plateau at the supposedly emotionally important number of $1,000 per ounce.

Of course, that’s the problem with the stock market – it is emotional and volatile. Gold and silver investments have traditionally been a safe and long-term investment in the materials that real “money” was based upon, relatively immune from great upsets to the value of fiat currencies and goods in the marketplace.

With the introduction of banking and trading schemes based upon the idea of gold and silver bullion, there has been considerable debate among investors about the overall impact of these investment vehicles upon the gold and silver spot price movements since the “crisis” began. Demand for both remains very strong, with prices tracking both stock and currency investments, even as markets continue what has thus far been a long loosing streak for overall stock prices worldwide.

Victoria Lopez

April 18, 2009

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