Gold, Silver & Other Commodities

There has been clear change in developing market activity that is favorable for gold and silver, both having the best and strongest recent rally since the 2011 highs. The rallies were also accompanied by the strongest volume increases over the past few years, another positive sign.

Precious metals have posted their best quarter in nearly 30 years and mining stocks are soaring from oversold multi-year lows. Those that were willing to buy when everyone else was selling have been handsomely rewarded in 2016 but we believe the gains are just getting started. In fact, gold would need to climb to somewhere around $3,000 per ounce to match the gains that gold experienced after bouncing from its prior bottoms and silver would need to climb towards $75 per ounce.

If you routinely invest in gold while paying little attention to its less-expensive little brother, you might be missing out. Silver has performed very well in 2016—up about 20% and is expected to go much much higher over the short and long term for the following 3 reasons. Words: 412

It’s possible we could be on the verge of a perfect storm for gold. Supply is tight and growing tighter and, if pension funds (and other institutional investors) enter this market for any reason, demand could spike. In that scenario, Economics 101 says the price could be forced higher.

With inflation picking up but the Fed unable to hike because of the significant global volatility RBC speculates that there are now growing parallels to the 1970s when external pressures and fragile growth rates did not allow the Fed to hike. This was also notably a time of strong gold price appreciation. Could the gold price be repeating history?

The purpose of gold is to protect purchasing power and hedge against inflation but gold is not immune from speculative bubbles and overvaluation and when the price of gold is compared to the CPI index it is clearly evident that gold has become overvalued.

You wouldn’t know it reading the Wall Street Journal, Bloomberg, or the other popular investment news sources . . . but thus far this year gold prices are up some 16 percent, making the yellow metal just about the top-performing investment asset class of 2016. We expect gold will continue to be one of the best – if not the best – investment-asset class in the months and years ahead. In fact, by this time next year, gold prices could challenge or even surpass their all-time high of $1,924 an ounce reached briefly in September 2011 and, as outlandish as it may seem, gold could double or even triple its historic high by the end of this decade.

I believe that the price of silver will eventually go over $100 a troy ounce and when that happens, those that got in today will be exceedingly happy with their returns. Others are projecting even greater gains. I am fully convinced that silver is a wonderful investment for the mid to long term.

Governments will need and want and will engineer higher gold prices because it is their primary method of dealing with otherwise unserviceable debt. Higher gold prices will have the effect of debasing/devaluing their respective currencies which is the result they're looking for. Dramatically cheaper currencies mean that the debt can be serviced much more readily.

Silver is undervalued these days but has shown over time that it can jump up in price with sudden, strong movements. Today’s infographic, which covers silver’s biggest win and loss streaks since 1970, really helps to show the magnitude of this volatility. In fact, silver has gone on 58 such runs where it jumped more than 10% in price in a mere matter of days. Take a look.