Wednesday, March 9, 2011

The next best thing

The physical Gold and Silver market is relatively small compared to the stock markets, forex and even some multi-billion dollar companies / wealthy investors. The demand for precious metals will continue to gather popularity going forward into 2012, 2013, 2014. I think that the worldwide fiat currency system will most likely be devastated before 2015.

There will be an increasing demand for physical Gold and Silver as inflation starts gathering steam going forward. We already see $4.50 gasoline and grocery prices increasing on a weekly basis in the United States. Most of the commodities are also rising including Corn, Oil, Coffee, Sugar and Cotton to name a few.  Take a look at the BAL which reflects the Cotton price:
 BAL has gone from $35 in July 2010 to a high of $117 a few days ago.  If you need a some new Jeans or any clothing made from Cotton, you may want to purchase it NOW.  The store price will lag the current Cotton price, but it will catch up and most items made from Cotton will increase in price going forward.

The 'light bulb' will turn on for some of the public and they will eventually start investing their savings account in physical Gold and Silver. (Mainly because they will finally realize that the dollar is dropping and inflation is killing them. They also do NOT TRUST the stock market, so mutual funds and individual stocks are not acceptable investments. Most people also do NOT have the time to swing trade and get into and out of stocks when the trade turns against them.  Most people have full time jobs and cannot watch the markets all day.)

Many people will think that $2000 Gold is too expensive, so they will turn to Silver which will  increase the spot price and lower the Gold / Silver ratio. This bull market is much different than the 1970 bull market because we will have WORLDWIDE DEMAND this time because of the INTERNET. The last bull market was 10 years, 1970-1980. This bull market is in it's 10th year and is nowhere near the 3rd stage. If this bull market lasts until 2015, it will be almost 15 years. (A typical commodity cycle)

This time around, people around the world will be hording Gold and Silver which will eliminate the supply. Miners will transfer their dore bars to the smelter / refiner and the coins and bars will be scooped up as soon as they hit the market. How will you get yours?  Well, you already have your cache right?  You were buying Gold <$800 and Silver <$15. (And continue to accumulate)

How will the 'public' get Gold and Silver when it is hard to find or buy?  They will buy 'The next best thing', the stock or ETF:  SLV, SIVR or PSLV.   If SLV does not 'diverge' lower from the Silver price, it may actually go higher than the spot price due to demand. (I know the hardcore physical guys would hate this...)

After the ETF's, Silver and Gold miners may be next on their list of possible places to park their money, especially if the shares are still appreciating. (When the stock markets are declining)  Or will the Dow Jones be at 50,000, S&P500 at 5,500 and Nasdaq at 11,500 due to all the 'money printing'?

It's a good thing that you already have your cache of physical Gold and Silver because they are not only going higher in price, but because it will be hard find and purchase in a few years.

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