Silver is at a six-month low and gold has dropped price
significantly over the week to create the perfect opportunity for
interested investors to move into these metals. The U.S. economy
is showing some sign of recovery and anxieties are abating in the
nation regarding a possible second financial crisis. While a
flourishing economy is not the right environment for precious
metals to fare well, there is enough uncertainty in global
economics to ensure that the current gold/silver price fall is a
temporary phenomenon. Irrespective of whether the U.S. economy
will improve or will be able to sustain improvement or not, gold
and silver are great assets to buy into right now.
Why is the Price Down?
Many factors have combined to bring the price of two of the most
popular precious metals down in recent days. The U.S.
housing-starts data is finally giving a clear indication that
this year may be witnessing a recovery in the economy. Until now
and especially during the recession, housing was the worst hit
segment in the U.S. In many cities, the prices of property
remained at an all time low even though improvements were evident
in all other sectors.
The improvement in the stock market also indicates that better
times may be ahead for investors keen on equities. The S&P
500 has risen by 6.9% over the year, in contrast to gold which
has dipped by nearly 6%.
Soros's Gold Sale Sparks Unease about Investing in
Billionaire and world-renowned investor
created a buzz of sorts in the markets recently. He sold his
stake in gold backed exchange traded products significantly over
the past quarter. Fellow investor Louis Bacon followed the
example to sell his complete stake in SPDR fund as well as
reduced exposure in the Sprott Physical Gold Trust. These
actions, especially Soros's, have shaken up the confidence of the
gold investing community. However, many analysts are of the view
that the billionaire investors have not sold their stake because
they fear gold devaluation but simply because they spotted a
short term opportunity in the market.
Global Economic Scenario Still Shaky
Elsewhere, in Europe, the conditions are not quite so heartening.
In Germany the economy has shrunk by 0.6% over the fourth quarter
while France has shown a contraction of 0.3%. The Japanese
economy is in a recession showing that the worst is not yet over
Given this, gold and silver may remain subdued over the short
term in U.S. markets but the slightest hint of problems in the
economy will send investors hurrying back to buy these safe haven
metals. The same is true even if the European situation appears
to be getting worse. One thing is clear, even if the American
economy is well on its way to recovery, investors are not likely
to sideline wholesale gold and silver completely since other
large economies are still under water with no sign of any
effective solution in the horizon.
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