Gold and Silver

As I am writing this on Monday morning, Jan. 14, 2008, the spot price of gold is $906.40 and the spot price of silver is $16.43. (Those numbers are huge, but 5 years from now we will look back at them in amazement, remarking at what an excellent buy gold was at $900 and silver was at $16 way back in 2008!)
Some have looked at the most recent increases in the metals, and have noticed how gold has outperformed silver percentage-wise. You may remember that I have always predicted that silver would outperform gold (percentage-wise) so what’s going on?
Most people agree that the current bull market in the metals began right around 2000-2001. The average price of gold in 2000 was $279.11 and the average price of silver was $4.95. Compared to today’s prices, gold has increased 324% since 2000, and silver has increased 332%. So in actuality, gold has not outperformed silver. It’s just that silver greatly outperformed gold at first, and now gold is catching up somewhat.
I listened to Jim Puplava over the weekend and he is of the opinion that in 2008, silver will outperform gold again. And I am still of the opinion that, before this mother of all bull markets is complete, (which probably won’t occur for another 10 years or more), we will look back and see that silver greatly outperformed gold overall. Now I am not saying that you should put all your eggs in one basket, and so I advise putting some of your precious metals investments in gold as well as silver, with much lesser amounts in platinum and palladium. (I also don’t recommend that you put ALL of your investment funds in precious metals alone, certainly, some should be in precious metals stocks – like mining companies – as well as energy, such as oil, natural gas, uranium, and alternative energy technologies – no, NOT ethanol, but General Electric.)
Gold and silver prices have done some remarkable things over the past few years. But up to now, all that we have seen is the beginnings of the birth pains. The “big event” is still to come. But if you hesitate too much longer, you may miss the big event entirely!
Note: After every big “run-up” in metal prices there is a little “pull back.” At the present time gold and silver prices may be due to a little pull back. It’s like the metal prices take two steps forward, and then one step backward, before the next two steps forward again. This is the normal progression. (Although at some point, due to panic, there will be a huge spike upward that you might miss if you are waiting for a pull back before buying.) Every time you see one of those little pull backs, you should see them as an opportunity to add to your precious metals portfolio. The human tendency is to have doubts when the price is falling, and many investors are shaken out (sell in a panic) when a big pull back occurs. In effect, they are buying high and selling low – the exact opposite of what you should be doing – buying low and selling high. If you understand the fundamentals (like the relationship between the dollar and precious metals) you will know that there is no where for precious metals to go – but up, up and UP! Ignore the little bumps and dips in the road, keep your eyes focused on your long-term destination. Predicting the outcomes for many investment classes is tricky, but this one is a no-brainer!

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