Precious metals investors need only patience and common sense
People usually rush to the sales in January to snap up the bargains and across Asia it has been the same story for gold since the price crash last month. Actually precious metal sales in the US and Europe have also jumped.
The price has also recovered by $100. But $1,420 an ounce at the time of writing is still very cheap. ArabianMoney readers have been asking us if this is the right time to buy.
Well $500 off the recent all-time high looks a good deal for gold. The long-term trend towards higher gold prices is not broken. The idea that money printing by central banks will stop anytime soon is laughable.
Indeed, the Bank of Japan last month launched a money printing program that will go down as one of the largest in history. And of course that is why the authorities deliberately crashed the gold price to try to dampen the impact of this event on inflation expectations. Deflating gold sure confused the hell out of speculators.
But the price fall will therefore be temporary. It makes excellent sense to ditch a paper currency temporarily in favor for a precious metal that is temporarily out of favor. The Chinese aunties know a thing or two about inflation and central banks and what keeps its worth.
However, what the recent gold price crash ought to remind investors is that precious metals are volatile. You should only invest as much as you can take in terms of price volatility.
If you are going to dump gold on a 10-20 per cent price swing don’t buy it. Timing such movements is impossible and if you try to then you will also miss out on the big upswings that also come with the territory.
Is silver a better buy? Should you be gearing up your investment by borrowing or by investing in gold producer stocks instead?
But we have no doubts about gold and silver as a successful investment class going forward that will not only hedge inflation but turn it into a profitable investment.
Precious metals performed spectacularly in the past decade of lesser money printing. They will do very much better now that the printing presses of the world are really beginning to spin.
All a precious metals investor needs is patience and buying in price dips is just commonsense.
- Outlook for gold prices continues to be bullish and buying gold on price dips may still be a good investment opportunity for UAE residents
- Silver prices holding up better than gold
- No (ad)ventures here: Why Investors should wait before jumping on the Iran bandwagon
- Gold: 2011 recap and what you should expect in 2012