In August, it seemed gold was about to cross the $2000 threshold – it came close to doing so, peaking out at over $1900 per ounce just about a month ago.
Silver too looked to be heading back to $50.
But as in times past, there was a pullback, especially here in the last few days with gold slumping around $170 (…or 10%) and silver nearly $10 per ounce. On Friday afternoon, gold stood at $1640 per ounce with silver registering at just above $30 an ounce. Silver in particular has had a rough week, one of its worst in fact.
Precious metals though aren’t the only investments to take a beating last week – the stock market has been rocky as well, especially following the Fed’s latest policy meeting where it announced a $400 billion debt swap plan.
This move seemingly provided some reprieve for the U.S. dollar as many investors – be they stock or commodity/metals – moved into ‘cash’ assets and Treasuries. Many perceive the Fed’s latest announcement to be an unsatisfactory response to the worsening economic situation here in the U.S. and Europe.
Another driver of this slide may be found with many large investors having to raise cash to cover what are known as ‘margin’ calls. A margin loan is basically a financial instrument that lends money to an investor to purchase stock or some other asset. A similar margin ‘call’ event occurred in June where stocks, oil and gold declined in-tandem for a few short days.
Gold and silver’s latest slide has some speculating whether the metals’ bull-run is over. According to some it is, especially considering their performance over the last several years.
But gold bugs and investors (…including us) largely don’t think so and consider the selloff of the last few days to be normal. All of the fundamentals leading to gold’s rise are still the same…much of the world, especially Europe and the U.S., have staggering debt problems with Greece perhaps nearing default once again.
Considering this factor is why we think now is an excellent buying opportunity.
Remember, gold was in the neighborhood of $1550-$1600 a couple of months ago and saw a near meteoric rise to nearly $2000. It’s hard to say how long it will take gold (…and silver) to regain the lost ground but many are in agreement that over time, metals are slated to go much higher.
So if you’ve been waiting for a good time to buy gold and silver, we certainly think now is the time to jump in or purchase more. In the end, we feel gold and silver bullion are the essentially the safest assets you can own in this current environment, even if there are times when it seems the winning streak is over.
Hang on – we’re confident this isn’t the last act for precious metals. The next few months will be critical.
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