Precious Metals Volatility: Buying Opportunity or Early Crash Warning?
May 10th, 2011 | By Andrew | Category: Financial, Precious Metals | Print This Article
Precious metals prices have been quite volatile over the last few weeks. The spot price of silver has been more stable than the spot price of gold, but for those who were looking for a straight path up to higher values, both metals have been a disappointment. What’s going on? Is this just the beginning of the precious metals price crash some are predicting, a massive buying opportunity, or something else entirely?
The answer may well depend on your reasons for being in precious metals. Are you looking to grow your wealth, protect your savings, or hedge against multi-national currency issues? Depending on your motivations, precious metals price dips have a different meaning for your investment choices.
Growing Your Wealth?
If you are trying to use precious metals investments as your primary platform for growing your wealth, dips and volatility are a concern. You want the security of tangible assets driving your wealth, but there is no denying that the speculative money of the major banks and national interest groups does have an impact. In this case, to stay calm and find the right course, you need to consider the long view.
The late, great American economy has been hamstrung by special interests and those intent on running our fiat currency into the ground. To grow wealth in this environment, you need to be locked onto the things in this world that are real assets. In this sense, dips and price fluctuations represent a chance for you to buy more gold, and the possibility of a crash in prices simply represents a greater opportunity to stock up. On the other hand, if you are having a hard time sleeping easy watching the metals prices fluctuate, trust your gut instincts telling you there’s a limit to what your system can handle. Redirect your next investments into other real items of value, like heirloom seeds, quality farm ground, or survival skills training. This will help you diversify your wealth while still keeping you in value-added assets.
Protecting Your Savings?
If you are using precious metals as a means of protecting your savings, you may want to consider the current market fluctuations as a warning to mind the balance of your portfolio. Gold has been more volatile than silver, and so if you are weighted heavily into gold, you are taking on more risk for your nest egg. Moving some of your money into silver will give more stability, as silver has industrial and medical uses that drive prices and consumption levels, uses that gold doesn’t have at the moment.
This isn’t to imply that gold will crash in the future. It’s more that gold’s price is driven by different factors than silver. For example, in China, which is currently poised to overtake India this year as the world’s largest gold buyer, spends 80 percent of its gold purchase funds on jewelry buying. In contrast, industrial uses of silver are the largest consumers of silver bullion and bars, providing a different underpinning for the spot price that may make you feel more secure as a saver in silver.
Hedging Your Bets?
If you are using your precious metals investments as a hedge against multi-national currency manipulations, then price dips are simply a part of the game. As central banks around the world struggle to prop up the perceived values of their fiat currencies, metals prices respond. Some days, metals respond with a strong rise in response to central bank moves; other days, metals prices fall as central bankers successfully convince large investors their currencies are stable.
Dips in this case are a sign that currencies are looking strong. If you believe in the inevitable decline of fiat currencies, you can look at dips as a chance to buy more gold, silver, or even platinum. You’ll be bolstering your hedged position against world currencies while others continue to put their hopes in printing presses and paper.
Given the state of the world markets, precious metals prices will likely continue to be quite volatile throughout the year. It’s not a straight path up to wealth, but depending on your motivations for buying precious metals, wealth in the eyes of the world may not be the most important consideration. Look at your own goals for growing wealth, protecting your savings, and hedging your bets against the world’s fiat currencies to decide what you want to do next with your precious metals holdings.
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