World Financial Watch

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.

With crude oil prices over $120 per barrel, it is no wonder that gas prices are so high.  Oil prices affect not only gasoline, but everything that revolves around gasoline as well.  Groceries are more expensive, anything that is delivered by a semi truck is higher, and even something as simple as ordering a pizza is costing a little more these days.

Oil companies are having a hard time keeping up with the rapid growth of India and China.  If these trends continue, it is likely that oil prices could reach $200 per gallon or more.

Oil prices are also affecting the rest of the economy.  With people spending so much more money on gas and groceries, they are spending much less on other products.  As this continues inflations is becoming an ever growing threat.

The government has constructed an economic stimulus packet to help compensate for high gas prices and also to help stimulate the economy.  By sending out free money, they are hoping that people will run out and start spending, however, recent polls show that most people will be using the free money to pay bills or to invest.

With prices continually rising and no end in sight, the world may be forced to look for an alternative fuel source to combat recession.

With gas prices reaching $3.50 per gallon in places, it might be time to look into an alternative to your 1969 Chevy pickup with the 350 big block engine.  Here are just a few tips that might save you a little money.

Try carpooling.  I know that riding in a car with that guy who is just way too perky that early in the morning for his own good may seem daunting, but it could cut your gas prices in half just by riding to work with someone.

Public transportation is a cheap and effective way of getting around.  An all day bus pass usually runs around $5.  If the old lady across from you beats you with her cane again, you can always move seats.

If you are planning on buying a car, look into a hybrid.  Not all hybrids are alike, though, so research your options before you buy.

Riding a bike is a cheap and healthy way to get around as long as you don’t live too far away from where you are going.

There is also one other mode of transportation I would like to suggest.  It was invented at the beginning of time, so you know it is tried and true.  Walking! It is the cheapest and healthiest way to get around.

So whether you want to save money or you are just looking to ‘stick it to the man,’ here are some ideas to help you reach your goal.

With such a huge demand for gold coming from around the world, it is no wonder that the price is projected to reach an almost unbelievable $1000 per ounce.  One of the biggest importers of gold is China, constituting a large chunk of the price hike.  Most of the gold usage is jewelry related.

Supply is also a factor.  With such a high demand, gold is becoming scarcer.  Miners are searching for new sources to combat the possible shortage.

Another reason for the increase is the decline of the US dollar. Gold and the US dollar move inversely in value: when the dollar goes down, the price of gold goes up.

The Federal Reserve has a lot of control over the value of the dollar.  When it raises interest rates, usually the value of the dollar goes up.  Now, with the Fed lowering interest rates in hopes of promoting trade between banks, the value of the dollar is going down and so, the value of gold is going up.

If the US economy keeps heading in the direction it is going, at least for awhile, then we will almost surely see gold hit an all time high.

Like many other precious metals, there is a huge demand for silver, and not a whole lot of supply.  The stockpile of silver that was built in the 1950s is nearly gone, forcing miners to search longer and harder for new places to find it.  This, of course, is one factor driving the price up.  It has been estimated that silver could be hitting $20 per ounce soon if trends continue.

With the US economy spiraling and the dollar weakening, investors watch precious metals with a keen eye.  The price of silver, like gold, goes up when the dollar declines.

Gasoline and grocery prices are forcing US consumers to spend less money on products that aren’t absolutely necessary.  However, the growing economies of China and India are taking over where the US is lacking in the precious metals market.

The Federal Reserve is lowering interest rates to combat the problems the real estate market is having.  While this is helping homeowners, it makes investing in US markets less appealing to foreign investors.

Some analysts believe the current decline in the price of silver is the lowest it will go.  While the recent shortage is making some investors nervous, it is though that most likely silver prices will jump back up, and fairly soon.

If you have gotten gas recently, you might have noticed that the price of fuel is a little bit on the high side.  Reaching prices over $3.50 in some places, it is only natural to wonder how much higher they will rise.

Many people wonder how gas prices can be so high and the oil companies can make such exorbitant profits at the same time.  Part of that answer revolves around the fact that gasoline is an inelastic product, meaning that no matter how high prices get, the demand will not usually decrease as a result.  It’s a lot like cigarettes… or crack.

The Organization of Petroleum Exporting Countries is a group of countries that produce oil.  The organization basically controls everything to do with oil in those countries, including price.  Now, this group is not a monopoly, but it does control two-thirds of the world’s oil, so it does have some monopoly like powers, and their job is to make sure that investors in oil get the best return on their money.

For the summer holidays, especially Memorial Day and the 4th of July, prices will most likely increase.  This is a long standing trend.  The good new is that they are supposed to level off to somewhere under $3.50 a gallon afterwards.  You never thought you would be so excited about $3.40 a gallon, did you?