Many wonder if they should buy precious metals in light of the current economy.  Gold and silver have seen dramatic increases over the past year only to drop back from their highs.  Gold reached just over $1889/ounce and silver hit $48.58/ounce.  Gold had dropped off 16% from the highs in August to the low in late September but it has regained most of that territory.  Gold is now just around 7% down from the high point.  Silver on the other hand has seen more dramatic swings.  Silver reached it’s high in late April and has stair stepped down since to it’s low around $30/ounce in late September.  That’s around double the losses seen in gold.  Silver has regained some ground but it is still around 28% off the high.

Now that we’ve looked at the recent history let’s look at the question of whether or not you should buy these metals.  Most experts agree that precious metals are a hedge against inflation.  What is inflation?  Inflation is the overall rise in prices and and overall lowering of purchasing power of money.  Are we at risk of inflation?  There are differing opinions but most agree that inflation is going to continue at a moderate pace.  Some are warning of impending hyperinflation siting the run up of debt over the last 40 years and the dramatic increase of food and energy (which are left out of core inflation numbers in government statistics due to “volatility”).

So inflation may be a reason to invest but will we see further increases in the value of gold and silver?  No one can predict values 100 percent but there are indication that we could still see value increases in both gold and silver.  Over the last 10 years  gold has realized gains of  547% and silver has seen an increase of 737%.   Some believe that the recent fall back in the price of precious metals was just a market correction due to the rapid gains being made.  Others believe that the drop was caused by the mainstream media declaring that the bubble had burst on precious metals.

Public sentiment can be fickle and what was hot one day can drop like a rock the next, look at Netflix for example.  The sell off that caused the drop in gold and silver prices may actually be an opportunity to buy before the price go back to and even beyond the highs obtained this year.  Some think gold could go up to $5,000/ounce and silver could get to $125/ounce.  While I’m not quite that bullish, I do think that both will see significant gains over the next few years.  The volatility in the global economy the increased demand for gold and silver in not only tech sectors but also by individuals leads me to believe that we could see more huge gains in these metals.

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