Gold, Silver See New Record Highs in April

With spring blooming across the country, gold and silver have been on a consistent rise in the month of April. Just today we’ve seen new records as gold crossed the $1500 per ounce threshold for a short time and silver breached $45 per ounce for a short while.

In the last month, gold has increased by nearly $80 per ounce while silver has risen by $9.31. As you know, gold has been more or less on a consistent climb since 2001 when it stood at $275 per ounce.

And even though silver is generally considered to be more volatile, it has seen tremendous growth from its low of around $9 in November 2008. Just in the last year, silver has nearly doubled twice!

But what’s driving this recent rally?

Outside of the usual reasons, it’s hard to tell why we’re seeing these considerable increases at this time. Dollar devaluation, sovereign debt issues, geopolitical instability, political disputes regarding the U.S. Government’s deficit spending and the closing in on the debt ceiling are all certainly in play.

Throw in the fact Standard & Poor’s recent downgrade of the credit outlook for the U.S. Government and you’ve got a recipe for explosive growth in precious metals.

All of these factors and other unknown ones are likely driving this current increase. But at a certain point, gold (…and silver) will take a breather like anything else. If these prices continue this consistent increase for an extended period of time, the view that gold and silver is currently experiencing a bubble will certainly become more and more relevant as we go along.

Anyone who follows markets knows there are times when things are up, times when they’re down and times when they’re flat. Gold and silver are no exception to this rule.

A closer look at annual charts for gold from 2006-2010 shows some interesting patterns as to how gold usually fares in the summer, which appears to be pretty flat. (Here’s a 10-year chart here. Visit Kitco or other firms to see more detailed year-to-year charts)

After remaining flat in the summer, gold has resumed pretty much a consistent climb for the remainder of the year in most cases…2006 and 2008 was the exception to this pattern. Even though 2008 marked the beginning of the recession and a pretty rough year for gold, it still ended the year flat. Stocks on the other hand suffered tremendous losses.

Could we expect to see a sell-off soon and a pretty flat summer?

Possible considering the last few years but remember, all of the above factors are also in play. Sovereign debt crises’ in Europe could buoy gold for a short bit and if there’s any further geopolitical chaos, all bets are off. But considering this run-up we’re seeing and the possibility the Fed will end or scale back its Quantitative Easing program, it’s also quite possible we’ll see a cool down and a relatively flat summer.

Predicting what markets will do is a lot like gambling and Las Vegas. While your odds are much better considering the amount of information out there, unforeseen events could totally change the dynamic.

That’s why we don’t say ‘buy now’ or ‘hold off and wait’ since any predictions could very well be wrong.

Only time will tell of course…if you jumped in last year or before, it’s been a good run. If patterns continue, you should continue to see a pretty solid run in gold for the foreseeable future (up to 5 years).

(But remember, don’t get nervous and sell because gold has a bad month or two. Think long-term and you will be generously rewarded down the road – we think!!)