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Inflation & deflation: precious metal experts agree we can learn from gold & silver prices

July 16, 2012162 view(s)

Economic dips and rises are a reality around the globe, but century after century, investors have turned to precious metals as a way of securing their wealth. Recent commentary in the media has been pointing more and more to the value of holding gold as a means of balancing out one's portfolio of investments, a way to counter the more erratic nature of stocks, bonds, currencies and other investments that have a more fluid nature. What might come as a surprise to some however, is that some analysts are also saying that silver prices may see rises that will impress, something that used to be in the domain more commonly associated with the yellow metal. For those already investing in silver, or who have used it as a way to diversify their holdings, this is good news and validation that silver has not lost its shine over the years.

Experts in the media have said that as value begins to drop in specific commodities or in the stock market, silver and gold have a tendency to shoot up in value, making impressive gains. Since the beginning of the 20th Century, a trio of rallies have caught the eye of historians who study patterns in the way value rises and falls in the precious metals markets. The first major gain came during the 1930's, clearly associated with the crash of the stock market that led to the Great Depression in the United States. The next rally took place during the 1970's, when economic turmoil was definitely in full swing, not only in the U.S., but in other parts of the world, too. The third and final rally is taking place right now, brought on by the crisis which began in 2008 and continues to send out aftershocks around the globe.

Silver prices are predicted by some analysts to rise further than expected; much of this is because while the euro zone continues to remain highly unstable, investors want to hold another asset that can give them value. Those investing in silver have not just a historic vehicle for storing wealth, but one that has a wide variety of uses which are unlikely to lose their popularity no matter how bad the economy gets. Even in an absolute collapse of civilization as we know it, silver would continue to hold value as a metal across the world.

A commentator at Kitco pointed out what makes the current rally in gold so unusual is that, unlike past rallies, the Dow's value has not consistently declined. Since 2001, the commentator pointed out, gold's value has been rising, but for the most part so has the Dow's. This includes dips in stock prices during 2002 as well as some of 2008 and 2009. It makes for an uneasy marriage since gold's value typically rises while the Dow drops.

So what could this mean for investors in the future? While no one can say with absolute certainty what an economy will or will not do, if the Dow does finally see a serious drop along the lines of the 1930's or 1970's drops, then gold and silver could skyrocket like never before. While no one hopes for these circumstances, investors in precious metals would certainly see major value increases.

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