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Gold And Silver Bubble

November 03, 2010 – There is persistent debate over whether gold and silver prices are experiencing a bubble. While that has indeed happened before, notably the rush to buy silver coins not too long ago, there is no reason to believe that it is happening now.

One widely held belief is that bubbles occur when vast numbers of the public jump into a bull market hoping to cash in. Whether that belief has any validity is immaterial, however, because public involvement in the gold and silver markets is minimal. Although the potential for quick big gains from speculation is certainly appealing to a struggling middle class, the simple truth is that very few have the resources to try, even with the relatively low price of silver.

Invariably bubbles are a product of speculation. Gold and silver investors, however, are generally conservative and they buy precious metals to hedge against inflation and weakening currency. In today’s grim economic climate unprecedented numbers of wealthy individuals and large funds are turning to the shelter of gold and silver investments, which in turn redefines the market drivers. Steadily increasing investment demand counters the ups and downs of commodity supply and demand and helps to keep gold and silver prices on their upward trend.

Until there is widespread recovery in the global market – marked by tight currency control, healthy trade, and low unemployment – investors will maintain strong positions in gold and silver. In the meantime, and that could be a very long time, investment demand can be expected to continue growing, steadily driving up gold and silver prices.

The presence of large numbers of big investors in the markets presents an unusual opportunity for the individual investor, creating excellent prospects for gold and silver investments – for both long term stability and for short term speculation.

Shannon King

Senior Staff Writer – GoldSilver.org

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