The sudden drop in gold and silver prices isn’t a sign to sell – it’s a rare opportunity to buy.

May 04, 2011 – The sudden drop in gold and silver prices isn’t a sign to sell – it’s a rare opportunity to buy. The death of Bin Laden understandably whipped up waves of patriotism and emotion, but it won’t last. Bad economic news on the home front will see to that.

Silver prices have dropped dramatically, but such is the market. Industrial consumers have been hard hit by the bull market and they are beginning to exert pressure to keep prices in check. But the temptation to leverage today’s prices is certain to make this lull very short. The demand is still there, production is still inadequate, and when the thrill of the moment passes investors will pick up where they left off, seeking safe haven amidst an ever worsening economy.

Despite global monetary tightening the Fed is adamant about holding down rates here, still believing that lower rates will get the economy going. But jobs fell far short of the hoped for 200,000 gains and the Institute for Supply Management’s nonmanufacturing index last month was more than four full points below the expected 57.

There is a growing belief that the Fed will go back to the only thing it knows how to do – print more money. Bernanke stills sees that as the worse of two evils, believing that the world will just sit back and take it. And if the Fed got wise and let rates go up, it would put a stake through the heart of the economy. Contrary to “common knowledge” rising rates don’t alone make gold and silver investments unwise.

The academics’ mantra that gold and silver do nothing, and are therefore unworthy of investment dollars when rates are on the rise, is based on the obsolete notion of measuring wealth by a now failed currency. In real terms, however, our wealth is eroding by over 4% per year in ultra conservative terms. Simply not losing wealth, which is inherent in gold and silver investments, is a pretty good return these days.

In America the worst is still ahead, and it could become far worse than most imagine possible. No brief moment of ecstasy can change that. Both gold and silver have a long way to go before there is sufficient improvement in the economy to warrant any change of strategy. Today’s gold and silver prices are nothing more than opportunity’s knock.

Shannon King

Senior Staff Writer –

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