Economic Review

6/21/2010

It’s time to address the precious metals markets but it’s not Gold we’re going to talk about this week but the cheaper non-yellow metal.

This past week the price of Gold registered a new historic high surpassing the $1260 an ounce mark. If you have been following the Market Doctor, this would be no surprise as the team has been sounding the bells of higher Gold prices since about $500 an ounce years ago. Much of the recent up-move in the shiny yellow metal has been the store of value story given the fiat currencies around the globe. Additional factors include an inflation hedge against the ramifications of huge printing of currencies, and finally, a safe haven during international unrest.

As Gold surged to new highs, the price of a much cheaper metal was still well over 10% under the recent highs established back in 2008 and about 60% lower than the levels established back in the late 1970s’. The recent lag in the price of the metal has been largely attributed to market players focusing on Silver as an industrial metal, where economic weakness has acted to drag the price down. However, at some point the market should re-adjust its focus from Silver’s industrial use to its viability as a store of value and safe haven security (simply all the reasons supporting gold).

With Gold at nearly $1,300 an ounce, perhaps an ounce of Silver under $20 an ounce may appear very attractive to investors.

Stephan Kudyba (MBA, PhD) THE MARKET DOCTOR

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