Gold and Silver Price Prediction

November 01, 2010 – Economic pundits are quick to slap on the label “bubble” on the explosive growth in gold and silver prices, but there is a fundamental difference between hard assets such as gold and silver and those based on currency.

Globalization is wreaking havoc on currencies, which over the last century have transitioned from gold and silver standards to fiat money. Now big investors are being forced to reexamine their precious metal positions as traditional investments threaten to continue weakening along with the faltering currencies on which they are based.

The current bull markets in gold and silver investment is in largely by demand from individual investors who are reaping the benefits of strongly diversified portfolios. Following expert advice gold and silver constitute up to 30% of their total investments. In contrast, major funds traditionally invest only a fraction of 1% in precious metals.

We have already seen the effect on gold and silver prices as ETFs buy up and hold larges quantities of the metals. Now imagine what would happen if pension and other huge funds around the world were to strengthen their gold and silver positions by only 1%.

That is precisely what Shayne McGuire, manager of the Texas Teacher Retirement Fund’s Gold Fund, has done. According to his calculations a 1% shift would drive the price of gold up to $10,000. Although that great a shift is unlikely any time soon, a more conservative estimate by one well known hedge fund manager, John Paulson, puts the price of gold at $4,000 by 2013.

The trend is clear: big investors are gravitating toward gold and silver investments to hedge their funds. This represents a fundamental shift in the market drivers and promises exciting times ahead for individual investors in gold and silver.

Shannon King

Senior Staff Writer –

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